Home Assignment #4 Comparison of Perfect Competition, Monopoly, Bertrand, Cournot, and

Home Assignment #4 Name:

Comparison of Perfect Competition, Monopoly, Bertrand,
Cournot, and Stackelberg Duopoly

This worksheet can be used to calculate equilibrium outcomes
under different market structures for linear demand and constant marginal cost.
Fixed costs are zero.
Firm-level quantity, total quantity, price, firm profits,
industry profits, consumer surplus, welfare and DWL are reported. Profit refers to the total industry profit,
Profit=Profit1+Profit2, and W=CS+Profit.

Base Parameters a b c1 c2 Table
0: Perfect Competition
Case 1 40.00 1.00 10.00 10.00 P Q Profit CS W DWL
Case 2 40.00 1.00 5.00 10.00
Case 3 60.00 1.00 10.00 10.00

My Parameters a b c1 c2
Case 1 40.15 1.18 10.94 10.07
Case 2 40.63 1.45 5.11 10.08 Table
1: Bertrand Table
2: Monopoly or Collusion
Case 3 60.58 1.98 10.79 10.16 P Q Q1 Q2 Profit1 Profit2 Profit CS W DWL P Q Q1 Q2 Profit1 Profit2 Profit CS W DWL

Table
3: Cournot Table
4: Stackelberg
P Q Q1 Q2 Profit1 Profit2 Profit CS W DWL P Q Q1 Q2 Profit1 Profit2 Profit CS W DWL

Notations:
a Inverse
demand intercept Instructions
b Inverse
demand slope
c1 Firm 1’s
marginal cost In
this assignment, you are asked to calculate the equilibrium outcomes under
Perfect Competition, Monopoly (Collusive Outcome), Bertrand, Cournot, and
Stackelberg Duopoly.
c2 Firm 2’s
marginal cost

P Price 1.
Insert the formulas in the tables (Table 0, 1,2,3, and 4) to calculate the
equilibrium outcomes. Use the parameters listed at the top of this worksheet,
but add a random component +RAND() to each parameter (as it is done in My
Parameters). Each student’s parameters should be different.
Q Total
Quantity
Q1 Quantity
produced by firm 1
Q2 Quantity
produced by firm 2 2.
In a separate worksheet titled Graph, plot the best-response functions for
firms 1 and 2 (under Cournot competition, Case 1: My Parameters) and isoprofit
curves for firm 1. Plot 5 different isoprofit curves for firm 1, which
correspond to different levels of profit, making sure to plot isoprofit curves
that go through the Cournot and Stackelberg equilibria and to label the
equilibria.
Profit1 Profit of firm
1
Profit2 Profit of firm
2
Profit Total
industry profit
CS Consumer
surplus
W Welfare
DWL Dead-weight
loss

 

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