. Find each player’s secure strategy
January 4, 2018
In the late 1990s, Vanguard Airlines operated as a low-cost carrier, offering low prices and limited services, out of Kansas City, Missouri. Not long after its inception, 300 Vanguard began offering a significant number of flights based out of Midway International Airport in Chicago, Illinois, as well. When Vanguard expanded to Midway, incumbent airlines, such as Delta, quickly responded to its low fares by offering many competing flights at comparably low prices. The intense price competition ultimately caused Vanguard to exit Midway in 2000 and file for bankruptcy in 2002. At varying points in time, the airline industry has been described as a contestable market; does the example of Vanguard support or refute this characterization of the airline industry? Explain
January 4, 2018

Cournot duopoly.

Consider a homogeneous-product duopoly where each firm initially produces at a constant marginal cost of $200 and there are no fixed costs. Determine what would happen to each firm’s equilibrium output and profits if firm 2’s marginal cost increased to $210 but firm 1’s marginal cost remained constant at $200 in each of the following settings:

a. Cournot duopoly.

b. Sweezy oligopoly

 

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