【正文】 d equilibrium, given the following demand curves: ? Q1(P1,P2)=1,00020P1+15P2 and ? Q2(P1,P2)=800+5P115P2 62 Chapter 1 A Pricing Problem for Procter Gamble ? Scenario 1) Procter Gamble, Kao Soap, Ltd., and Unilever, Ltd were entering the market for Gypsy Moth Tape. 2) All three would be choosing their prices at the same time. Differentiated Products 63 Chapter 1 ? Scenario 3) Procter Gamble had to consider petitors prices when setting their price. 4) FC = $480,000/month and VC = $1/unit for all firms Differentiated Products A Pricing Problem for Procter Gamble 64 Chapter 1 ? Scenario 5) PG’s demand curve was: Q = 3,(PU).25(PK).25 ?Where P, PU , PK are PG’s, Unilever’s, and Kao’s prices respectively Differentiated Products A Pricing Problem for Procter Gamble 65 Chapter 1 ? Problem ? What price should PG choose and what is the expected profit? Differentiated Products A Pricing Problem for Procter Gamble 66 Chapter 1 PG’s Profit (in thousands of $ per month) 226 215 204 194 183 174 165 155 106 89 73 58 43 28 15 2 56 37 19 2 15 31 47 62 44 25 6 12 29 46 62 78 52 32 15 3 20 36 52 68 70 51 34 18 1 14 30 44 93 76 59 44 28 13 1 15 118 102 87 72 57 44 30 17 Competitor’s (Equal) Prices ($) PG’s Price ($) 67 Chapter 1 ? What Do You Think? 1) Why would each firm choose a price of $? Hint: Think Nash Equilibrium 2) What is the profit maximizing price with collusion? A Pricing Problem for Procter Gamble 68 Chapter 1 Competition Versus Collusion: The Prisoners’ Dilemma ? Why wouldn’t each firm set the collusion price independently and earn the higher profits that occur with explicit collusion? 69 Chapter 1 ? Assume: 16$ 6$ :C o l l u s i o n12$ 4$ :mEq u i l i b r i uNa s h 212 :d e m a n d s239。 P1 = P2 = $3 ?Q = 27。 FirmThe Linear Demand Curve 36 Chapter 1 Oligopoly ? An Example of the Cournot Equilibrium 10302010)2115(21152111??????????QP2:mEquilibriu CournotThe Linear Demand Curve 37 Chapter 1 Duopoly Example Q1 Q2 Firm 2’s Reaction Curve 30 15 Firm 1’s Reaction Curve 15 30 10 10 Cournot Equilibrium The demand curve is P = 30 Q and both firms have 0 marginal cost. 38 Chapter 1 Oligopoly MCMRMRRMRPQR????????????? an d 15 Q w h en 023030)30(2Profit Maximization with Collusion 39 Chapter 1 Oligopoly ? Contract Curve ? Q1 + Q2 = 15 ?Shows all pairs of output Q1 and Q2 that maximizes total profits ? Q1 = Q2 = ?Less output and higher profits than the Cournot equilibrium Profit Maximization with Collusion 40 Chapter 1 Firm 1’s Reaction Curve Firm 2’s Reaction Curve Duopoly Example Q1 Q2 30 30 10 10 Cournot Equilibrium 15 15 Competitive Equilibrium (P = MC。 F i r m212 :d e m a n d s139。 marginal cost for firm 1 is MC1=100, while marginal cost for firm 2 is MC2=190. Calculate the Cournot equilibrium quantities. 42 Chapter 1 First Mover Advantage The Stackelberg Model ? Assumptions ? One firm can set output first ? MC = 0 ? Market demand is P = 30 Q where Q = total output ? Firm 1 sets output first and Firm 2 then makes an output decision 43 Chapter 1 ? Firm 1 ? Must consider the reaction of Firm 2 ? Firm 2 ?Takes Firm 1’s output as fixed and therefore determines output with the Cournot reaction curve: Q2 = 15 1/2Q1 First Mover Advantage The Stackelberg Model 44 Chapter 1 ? Firm 1 ? Choose Q1 so that: 1221111 300Q Q PQ R MC, MC MR ????? 0 MR therefore First Mover Advantage The Stackelberg Model 45 Chapter 1 ? Substituting Firm 2’s Reaction Curve for Q2: and 15:015211111????????MRRMR2111121112115 )2115(30R??????First Mover Advantage The Stackelberg Model 46 Chapter 1 ? Conclusion ?Firm 1’s output is twice as large as firm 2’s ?Firm 1’s profit is twice as large as firm 2’s ? Questions ? Why is it more profitable to be the first mover? ? Which model (Cournot or Shackelberg) is more appropriate? First Mover Advantage The Stackelberg Model 47 Chapter 1 Example ? Two firms have the same constant average and marginal cost, AC=MC=20, and face the market demand curve P=500Q=500(Q1+Q2). Suppose Firm 1 is the Stackelberg leader. ? A) Find Firm 2’s Cournot reaction curve. ? B) Write out the expression for Firm 1’s total revenue and substitute in Firm 2’s reaction curve. ? C) Derive MR1 from your answer to part B) and set it equal to MC to find the profit maximizing output for Firm1. Find the profit maximizing output level for Firm2 (the follower) form its reaction curve. ? D) What are profits for each firm? 48 Chapter 1 Price Competition ? Competition in an oligopolistic industry may occur with price instead of output. ? The Bertrand Model is used to illustrate price pet