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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 ...


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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 ...


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I would recommend the The theory of Industrial Organization and the Game Theory from Jean Tirole


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Here is a counterexample (i.e. an example showing that the given statement is false). Assumptions: The cost of producing each unit of the good is \$1. All consumers are exactly identical, with each consumer willing to pay up to \$10 for one unit of the good. (Also, each consumer is willing to pay at most \$0 for a second unit of the good.) Market 1 has 200 ...


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Your conjecture seems to be contradicted, at least for small values of $\sigma$. You can draw the function with the following R-code: qq_f = function(x,k,h,sig){ -pnorm(-k, sd=sig)*( (dnorm(h*(1-x), sd=sig))^2 ) - 0.5*dnorm(-k^2, sd=sig)*( 2*pnorm(h*(1-x), sd=sig) -1 )^2 } curve(qq_f(x,k=0,h=1,sig=0.5),col='blue',xlim=c(-1,3),type='l',main="A ...


2

I think standard in Bertrand competition with different constant marginal cost is another assumption in case of equal prices. Instead of sharing demand equally, you could assume that in case of equal prices the more efficient firms supplies the entire demand. As a result, all price pairs $p_1=p_2=p$ with $p \in [c_1,c_2]$ constitute an equilibrium. All ...


2

A market is covered if all consumers will choose to buy from at least one of the firms at the prevailing prices. For example, consider a standard Hotelling model with two firms who are located at opposite ends of the unit interval. Suppose that each firm charges that same price $p$ and that consumers are uniformly located on $[0, 1]$. Finally, suppose that ...


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The article Quality of Information and Oligopolistic Price Discrimination by Liu and Serfes covers this topic in great detail. It also has a rather nice literature review.


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Both of them are consistent. The economic profit is the total revenue $TR$ minus total cost $TC$ but in economics costs must include also opportunity costs not just accounting ones. However, for all standard market structures $TR>TC$ happens only if the marginal revenue or price $P$ is above marginal costs $MC$. Also if there is positive economic ...


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For a slightly different perspective and somewhat newer tools, I would suggest "Oligopoly Pricing: Old Ideas and New Tools" by Xavier Vives.


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The division of the economy into sectors is arbitrary, meaning there is no universally accepted division of the economy. It is contextually dependent.


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Just looking at the setup, everything is symmetric. This means that if they were to move simultaneously then we should have $p_1 = p_2$, and the payoffs for the two firms the same. According to your calculation, $(p^*_1,p^*_2)=(\frac{a}{2},\frac{a}{4})$. Since $Q_1 = Q_2 \Rightarrow \pi_1 > \pi_2$. So it's quite clear that in this case, the first mover ...


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The problem formulation admits the following Normal Form representation. We can reject any strategy involving price greater than 2, as demand falls to zero and such strategies are strictly dominated by those for which prices are either 1 or 2. 0 1 2 0 [0,0] [0,0] [0,0] 1 [0,0] [0.5,0.5] [1,0] 2 [0,0] [0,1] [1,1]...


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You are right that you first have to find F3's best-response function. F1 and F2 take as given this reaction of F3 to whatever they produce. Hence, you plug this best-response function into the incumbents' profit maximization problem. In that way, you take care of the fact that the incumbents anticipate F3's reaction, indirectly determining $q_3$. You ...


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Start with the second stage, this is just Cournot competition between firm 2 and firm 3. You can solve this for the Nash equilibrium by setting the first order condition for firm 2 and firm 3 and solving these two equations, taking $q_1$ as given. This will give you quantities $q_2$ and $q_3$ in terms of $q_1$ which you can then plug into the profit function ...


1

If a market has free entry, then profit will tend to zero in the long run. Monopolistic competition and perfect competition are both characterized by zero long-run profit. Of course a firm would prefer to enter a market in which long run profits can be earned, but such markets are characterized by barriers to entry. To better understand this, consider a ...


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