Intermediate Microeconomics · free preview
Commitment, Entry, and Module Summary
Commitment devices make threats credible, capacity expansion deterring entry by changing the entrant's best response, limit pricing trading margin for safety, and the module's four outcomes, collusion 44, Cournot 58.7, Stackelberg 66, Bertrand 88, close the oligopoly map on one demand curve.
1. Credibility and devices
Credibility and devices
2. Capacity as a threat
Capacity as a threat
3. The oligopoly map
The oligopoly map
4. The module closed
The module closed
5. Subgame perfection
What does credibility require of a threat in a sequential game?
6. Capacity deterrence
How does already-sunk capacity manage to deter entry?
7. Limit pricing
Why does a naked low price fail to deter entry?
8. The module map
Order the four outcomes by total output, collusion, Cournot, Stackelberg, Bertrand.
9. The limit quantity's neighborhood
At what quantity does price hit marginal cost 12 on this demand curve? Write the number.
10. Cournot industry profit
Compute total Cournot duopoly profit, twice 860.4, and write the number.
11. Ranking the profits
Rank total industry profit, collusion 1936, Cournot 1720.9, Stackelberg 1452, Bertrand 0.
12. Sunk capacity as armor
An incumbent sinks capacity for 44 units before entry. Why does this deter the rival?
13. The limit price's cost
An incumbent holds price at 30 trying to look unprofitable to entrants. What does each period cost?
14. The map's endpoints
What do collusion at Q of 44 and Bertrand at Q of 88 share on this demand curve?
15. Stackelberg industry profit
Compute the Stackelberg industry profit as leader 968 plus follower 484, and write the number.
16. Cournot total output
Compute total Cournot output as twice 29.33, and write the number to two decimals.
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