# Tag Info

17

Opportunity Cost of the Seats Once the movie is made the cost of production is sunk and irrelevant to the proper pricing of tickets. Only the marginal costs of serving an additional customer and the opportunity cost of showing a different film would enter into ticket pricing. Since cinemas should be setting the number of screens for each movie so that the ...

9

It can be profitable for the monopolist to do so. For the conventional producer who is a price taker the profit objective function looks like this: $$\max_{q} \Pi^c$$ where $\Pi^c = P \cdot q - C(q)$. That is, they seek to maximize profits, facing an exogenous price to sell goods and where costs are a function of amount produced. If everything is nice and ...

9

Iet's say we have n identical firms and an infinite horizon of time. The n firms sustaining the collusion, will find optimal to fix the same price $p_m$ where $p_m$ is the price of the monopoly level and we define $\frac{\Pi^m}{n}$ as the profits each firm is obtaining by sustaining the collusion in each moment t. Now, of course each firm can betray the ...

9

Yes, this has actually been quite an active area for research within the consumer search literature. As a starting point, I would recommend looking at the following: BAYE, M. R., AND J. MORGAN (2001): “Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets”, American Economic Review, 91(2), 454–474. These authors have ...

9

Yes, there is no equilibrium in pure strategies. For any price charged by firm 2 above $c_1$, firm one could only best respond by charging the largest price that is strictly smaller. which is impossible. If both firms charge at most $c_1$, one of these firms must make a loss, which cannot be a best response. So there is no Nash equilibrium in pure strategies....

8

While taking Industrial Organization I remember working with: Strategies and games: theory and practice by Dutta Introduction to industrial organization by Cabral Industrial organization: theory and applications by Shy Industrial Organization: Markets and Strategies by Belleflamme and Peitz The first two are rather introductory while third and forth are ...

7

This is the cost curve of oil production (North American shale at $65): Source And this is the cost curve of major American projects: Source While "Citi's Ed Morse highlighted this chart, showing that for most US shale plays, costs are below$80 a barrel." And clearly, many of these new projects would lead to losses with oil prices at $60: Source The ... 7 Firstly, suppose we take a utilitarian welfare standard that is linear in money. That is to say, suppose that both utility and profits are linear in the amount of money that consumers and firms have (but not necessarily linear in anything else). In that case, the Pareto standard and the utilitarian social welfare criterion coincide exactly! You can see a ... 7 The following paper compares the efficiency of the Bertrand and Cournot game in the case of product differentiation. However, their utility function is more general than the Dixit/Stiglitz case. You also do not have an infinite number of firms competing in each differentiated product but just one firm per differentiated product (the number of differentiated ... 6 Cannibalization Assuming that the [near] expired goods cannot be sold at full cost anymore, offering them for sale at a significant discount (instead of destroying them) will compete with your own offer of full-priced goods that presumably have much higher margins. This is pretty much the definition of https://en.wikipedia.org/wiki/Cannibalization_(... 6 Clifford Winston´s excellent book Government Failure versus Market Failure: Microeconomics Policy Research and Government Performance surveys the literature on the effects of government regulation generally and antitrust merger control specifically. He doesn't exactly answer your question on economy-wide structural effects, but largely concludes that merger ... 6 You'll get different answers depending on assumptions, so the answer is maybe. Two papers come to mind. For a continuous time model, see Sannikov and Skrzypacz (2007). They show that collusion is impossible with imperfect monitoring if new information arrives continuously and actions can respond quickly in accordance with new information. A well known ... 6 It is my impression that this has been formalized under the$\varepsilon$-equilibrium concept ("epsilon-equilibrium"). It is even called "approximate-Nash" equilibrium. Shamelessly copying from the relevant wikipedia article (which includes some literature references) === The standard definition === Given a game and a real non-negative parameter$\...

6

From the Industrial Organization by Belleflame and Petiz (Page 34/35, Chapter 2): While the m-firm concentration ratio adds market shares of a small number of firms in the market, the so-called Herfindahl index (also known as Herfindahl–Hirschman index) considers the full distribution of market shares. We can conclude that the mathematical approach in ...

5

Since it was mentioned in an another answer let's clear this first: whether the transportation (and its time and monetary costs) should be associated with the intended consumption of the good you are going to purchase, or it can be considered as consumption on its own, depends on your subjective view of it: do you derive any form of pleasure by the trip ...

5

The monotonicity result that they prove in their lemma 1 (p. 556) is stronger than you think: it states that whenever $q>q'$, the support of $R_1(q)$ is "uniformly below" the support of $R_1(q')$. In other words, it is impossible to find any realizations $(r,r')$ of $R_1(q)$ and $R_1(q')$, respectively such that $r>r'$. The proof of this result relies ...

5

For models of the informational role/effects of third-party certifiers on an industry, you might like to look at Lizzeri, Alessandro (1999). “Information Revelation and Certification Intermediaries”. RAND Journal of Economics 30.2, pp. 214–231. Albano, Gian Luigi and Alessandro Lizzeri (2001). “Strategic Certification and Provision of Quality”. ...

5

One interpretation I can offer. The demand function can be expressed as: $$Q_1 = Q_1(p_1,p_2)$$ Let us take the total differential: $$dQ_1 = \frac{\partial Q_1(p_1,p_2)}{\partial p_1}dp_1+\frac{\partial Q_1(p_1,p_2)}{\partial p_2}dp_2$$ Assume that $Q_1$ remains unchanged with respect to a change in prices. This implies that $dQ_1=0$. Solving the ...

4

This is how I would try to model this. It needs some more detail, but I think this is the basic gist of it. You need to allow firms to imperfectly observe other firms' prices. One way that I would do this is to assign some probability to the event that any given firms price is observed. Say, each firm flips a coin and if its head, the firm must reveal its ...

4

A producer won't always want the retail outlets to compete on price. This is the reason for minimum resale price maintenance. By competing on price, it may be that the retailers competition amounts to something closer to a zero-sum game. Supposing there are some consumers who value something like service, it might be better for joint profits to provide good ...

4

Yes, the same authors Berry, Levinsohn, Pakes have written a second paper that uses both macro and micro data to estimate demand for automobiles as a function of the characteristics of the car. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market" http://dash.harvard.edu/bitstream/handle/1/3436404/...

4

Here's how I would solve it : Finding Q, P, and $\pi$ $AR = 20 - 2Q$ Know : $AR = \frac{R}{Q}$ and $R = PQ$ Therefore : $R = 20Q - 2Q^2$ $PQ = 20Q - 2Q^2$ $\Rightarrow$ $P = 20 - 2Q$ $\hspace{22mm} (1)$ $\Rightarrow$ $Q = \frac{P - 20}{2}$ $\hspace{28mm} (2)$ $\Rightarrow$ $\pi = 20Q - 2Q^2 - C$ $\hspace{8mm} (3)$ Additional Information : $... 4 How about constant elasticity demand:$Q(p)=p^a$, where$a<0$? Such functions, as their name implies, have the advantage that the price elasticity of demand is constant along their entire length: $$\eta=Q'(p)\frac{p}{q}=ap^{a-1}\frac{p}{p^a}=a.$$ Since the elasticity of the demand function is directly controlled with a single parameter, such functions ... 4 The 'long run' assumption is not about whether the firms already on the market are price takers (perfect competition) or oligopolists but whether entry to the market is free. If entry to the market is free then in the long run profits tends toward zero, as a profitable market makes it tempting for more firms to enter. If you have special asymmetric ... 4 I think the appropriate discretisation should be something like $$C_i=\left[\int_0^i\!c(i)^{1-\alpha}\,di\right]^{\frac{1}{1-\alpha}}=\lim_{I\rightarrow\infty}\left[\sum_{j=0}^{(I-1)i}\frac{1}{I}c\left(\frac{j}{I}\right)^{1-\alpha}\right]^{\frac{1}{1-\alpha}}$$ The below figure illustrates where each term of the sum comes from (for the case of$I=5$) (The ... 4 First point: you write "I am struggling with the differentiating between when to use$ Q=q_1+q_2$and$Q(q_1,q_2)=q_1+q_2$". But these are the same thing: both define$Q$as a function of$q_1$and$q_2$. It's just that the second expression makes this functional dependence explicit by writing out the arguments, whereas the first does not. This is purely an ... 4 This is also a big theme in agriculturaland environmental economics given the amount of nutritional, healthy, organic and other labels that we see on food these days. Here are a few references to start: Hamilton, Stephen F., and David Zilberman. "Green markets, eco-certification, and equilibrium fraud." Journal of Environmental Economics and Management 52.... 4 Why not using the number of workers? And simply replacing sales (or output) by workers in the HHI or C4 indices. I saw this in the literature, but where? May be in a report of the German "Monopolkomission"... EDIT: I found an example for France. The share$C_{10}\$ of the production of the 10 biggest firms is very correlated with their share in total ...

4

Personal consumption expenditure (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. It accounts for about two-thirds of domestic final spending, and thus it is the primary engine that drives future economic growth. PCE shows how much of the income earned by households is being spent on current consumption as ...

3

Simple answer: It cost companies money to do any, even doing nothing. The immediate issues with selling out of date food in most jurisdictions would be: Do nothing (stockpile non-perishable.) Goods are assets of the company and affect internal and external accounting, especially accounting of value of publicly traded companies. Goods as assets are likely ...

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