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Subjects -> Economics -> Microeconomics -> Posting #20530

Economics, Microeconomics

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game theory

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You are the manager of a firm in a new industry. You have gotten the jump on the only other producer in the market. You know what your competitor's cost function is, and it knows yours. Your products, although different to experts, are indistinguishable to the average consumer. Your marketing research team has provided you with the following market demand curve:

Q = 1,250 - .5P.

Your cost function is

CA(QA) = 180 + 8QA.

Your competitor's cost function is

CB(QB) = 350 + 6QB.

Your diligent effort will allow you to decide how much of your product to provide and allow you to place it on the market shortly before your competitor will be able to make its product available for sale. What output level will you choose, and what price will you charge? Explain.

By OTA: Mutasem Sinnokrot, PhD

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