Oligopoly Analysis

Analytical Exercise: Equilibrium in an Oligopoly Market with Capacity Constraints
Consider the economic environment we encountered in the online exercise on Monday, in
which a set of firms engage in Bertrand competition in four distinct markets. Each firm
produces a homogeneous good at a constant marginal cost � = 4, up to a capacity constraint �
which determines each firm’s maximum production. The firms compete in prices: each firm
posts a price in each market, where prices must be in whole numbers. Capacity constraints and
fixed costs of production vary by market according to the schedule below:
• Market 1: Capacity � = 1000 per firm, no fixed cost of production;
• Market 2: Capacity � = 1000 per firm, fixed cost � = 35,000 per firm;
• Market 3: Capacity � = 400 per firm, fixed cost � = 35,000 per firm;
• Market 4: Capacity � = 2000 per firm, fixed cost � = 35,000 per firm.
Demand is identical across markets and described by the schedule
on the right (also provided in more detail in the Excel file
attached). Consumers buy first from the firm with the lowest price
until its capacity is exhausted, then buy from the firm with the
second-lowest firm, and so on until no additional consumer wishes
to purchase at the lowest price charged among firms with
remaining free capacity. If two (or more) firms post the same
price, they split the remaining quantity demanded at that price,
after any firm charging a lower price has already sold the total
quantity it can produce.
You observe data on prices and quantities for a five-firm oligopoly
in these four markets, given below (generated from play in our inclass exercise on Monday). In this particular market, it appears
that four of the five firms are competing actively, while one firm
(Firm 3) is playing passively. Let us say that the passive Firm 3 is a
“Nonprofit,” while the remaining four firms are “For-profit.” Using
the models of oligopoly behavior we have discussed, your
assignment is to analyze the behavior of the four “For-profit” firms
in this market, taking the prices of the “Nonprofit” as given.
Assignment: In 1-2 pages, provide written answers to the following questions.
1. Analyze the Nash equilibrium of the pricing game between the four For-Profit players in
each of the four markets above, taking the price charged by the Nonprofit (Firm 3) in
each market as given. Based on this analysis, what theoretical predictions can you make
about the price in each market?
Market Demand
Schedule
Price Quantity
10 5120
20 4620
30 4190
40 3810
50 3470
60 3160
70 2880
80 2610
90 2360
100 2120
110 1890
120 1670
2. How do the observed prices charged by the four “For-profit” players compare with the
Nash equilibrium predictions in Part 1? Which Nash equilibrium predictions are borne
out in the data? Which predictions are not?
In your answer to Question 1, it may be helpful to consider the following:
• Should unavoidable fixed costs matter for Nash equilibrium prices? Why or why not?
(Note: By “unavoidable”, we mean that firms cannot leave the market this period.)
• If there were no capacity constraints, and ignoring the fact that price must be an
integer, what would be the Nash equilibrium price in each market?
• How do capacity constraints change our predictions about prices in each market? How
would we expect prices to be ranked with high, medium, and low capacity constraints?
• Consider any potential price � in the demand schedule below. Suppose that Firm 1’s
three for-profit rivals each charge this price � (holding the Nonprofit’s price fixed at its
observed value). Consider two strategies for Firm 1: “matching” the price charged by its
active rivals by setting �. = �, or “undercutting” all three active rivals by reducing price
by $1 to �. = � − 1. Bearing in mind Firm 1’s capacity constraints, what is the *highest*
price � on the demand schedule at which Firm 1 prefers to match than undercut? How
does this price vary with the capacity constraint �? And what does this tell you about
Nash equilibrium prices in each market?
[Hint: For a price � to be a symmetric Nash equilibrium, it must be that no for-profit
firm prefers to undercut when all for-profit rivals charge the given price. In this
particular game there may in general be many Nash equilibria, but from the firms’
perspective the best equilibrium will be the one with the highest price.]
Evaluation: This assignment will count for 10 percent of your final course grade. In your
answers, I will be looking for a clear discussion of both the key economic and strategic issues
governing competition in this market, and how predictions of the underlying theory fit (or
don’t!) the actual prices observed. Note that data *will not* line up with theory on every
dimension, although in some key dimensions it should. Long answers are not necessarily better;
the key is to identify and analyze the core questions involved.
Submissions are due via Canvas at midnight on Friday, April 10. Late submissions will receive a
one letter grade penalty for each day late.
Data on outcomes for each market is provided on the next page.
Market 1: Moderate capacity, no fixed costs
Firm Price Sales Capacity Revenues

Oligopoly Analysis

Analytical Exercise: Equilibrium in an Oligopoly Market with Capacity Constraints
Consider the economic environment we encountered in the online exercise on Monday, in
which a set of firms engage in Bertrand competition in four distinct markets. Each firm
produces a homogeneous good at a constant marginal cost � = 4, up to a capacity constraint �
which determines each firm’s maximum production. The firms compete in prices: each firm
posts a price in each market, where prices must be in whole numbers. Capacity constraints and
fixed costs of production vary by market according to the schedule below:
• Market 1: Capacity � = 1000 per firm, no fixed cost of production;
• Market 2: Capacity � = 1000 per firm, fixed cost � = 35,000 per firm;
• Market 3: Capacity � = 400 per firm, fixed cost � = 35,000 per firm;
• Market 4: Capacity � = 2000 per firm, fixed cost � = 35,000 per firm.
Demand is identical across markets and described by the schedule
on the right (also provided in more detail in the Excel file
attached). Consumers buy first from the firm with the lowest price
until its capacity is exhausted, then buy from the firm with the
second-lowest firm, and so on until no additional consumer wishes
to purchase at the lowest price charged among firms with
remaining free capacity. If two (or more) firms post the same
price, they split the remaining quantity demanded at that price,
after any firm charging a lower price has already sold the total
quantity it can produce.
You observe data on prices and quantities for a five-firm oligopoly
in these four markets, given below (generated from play in our inclass exercise on Monday). In this particular market, it appears
that four of the five firms are competing actively, while one firm
(Firm 3) is playing passively. Let us say that the passive Firm 3 is a
“Nonprofit,” while the remaining four firms are “For-profit.” Using
the models of oligopoly behavior we have discussed, your
assignment is to analyze the behavior of the four “For-profit” firms
in this market, taking the prices of the “Nonprofit” as given.
Assignment: In 1-2 pages, provide written answers to the following questions.
1. Analyze the Nash equilibrium of the pricing game between the four For-Profit players in
each of the four markets above, taking the price charged by the Nonprofit (Firm 3) in
each market as given. Based on this analysis, what theoretical predictions can you make
about the price in each market?
Market Demand
Schedule
Price Quantity
10 5120
20 4620
30 4190
40 3810
50 3470
60 3160
70 2880
80 2610
90 2360
100 2120
110 1890
120 1670
2. How do the observed prices charged by the four “For-profit” players compare with the
Nash equilibrium predictions in Part 1? Which Nash equilibrium predictions are borne
out in the data? Which predictions are not?
In your answer to Question 1, it may be helpful to consider the following:
• Should unavoidable fixed costs matter for Nash equilibrium prices? Why or why not?
(Note: By “unavoidable”, we mean that firms cannot leave the market this period.)
• If there were no capacity constraints, and ignoring the fact that price must be an
integer, what would be the Nash equilibrium price in each market?
• How do capacity constraints change our predictions about prices in each market? How
would we expect prices to be ranked with high, medium, and low capacity constraints?
• Consider any potential price � in the demand schedule below. Suppose that Firm 1’s
three for-profit rivals each charge this price � (holding the Nonprofit’s price fixed at its
observed value). Consider two strategies for Firm 1: “matching” the price charged by its
active rivals by setting �. = �, or “undercutting” all three active rivals by reducing price
by $1 to �. = � − 1. Bearing in mind Firm 1’s capacity constraints, what is the *highest*
price � on the demand schedule at which Firm 1 prefers to match than undercut? How
does this price vary with the capacity constraint �? And what does this tell you about
Nash equilibrium prices in each market?
[Hint: For a price � to be a symmetric Nash equilibrium, it must be that no for-profit
firm prefers to undercut when all for-profit rivals charge the given price. In this
particular game there may in general be many Nash equilibria, but from the firms’
perspective the best equilibrium will be the one with the highest price.]
Evaluation: This assignment will count for 10 percent of your final course grade. In your
answers, I will be looking for a clear discussion of both the key economic and strategic issues
governing competition in this market, and how predictions of the underlying theory fit (or
don’t!) the actual prices observed. Note that data *will not* line up with theory on every
dimension, although in some key dimensions it should. Long answers are not necessarily better;
the key is to identify and analyze the core questions involved.
Submissions are due via Canvas at midnight on Friday, April 10. Late submissions will receive a
one letter grade penalty for each day late.
Data on outcomes for each market is provided on the next page.
Market 1: Moderate capacity, no fixed costs
Firm Price Sales Capacity Revenues

COVID-19 and the Economy (Case Study )

Case Study: COVID-19 and the Economy 
Currently the United States and the world is grappling with containing the spread of COVID-19
amongst its citizens. As time progresses, the number of infections and deaths surge both
domestically and internationally. There have been many conversations and viewpoints on how
best to approach taking care of the sick, reducing exposure to others, and stabilizing the
economy. Texas Lt. Governor Dan Patrick is among the many who has voiced their opinion on
the matter. He has stated “Those of us who are 70-plus, we’ll take care of ourselves, but don’t
sacrifice the country.” He has also stated that he is “not living in fear of COVID-19. What I’m
living in fear of is what’s happening to this country.” This sparked comments on whether the government should prioritize the economy or public health. Using 2 ethical philosophies, what is
the ethical option for the United States? Should the government prioritize public health or the
economy? (these philosophies can have different conclusions). Feel free to use sources
(reference page will not count toward the 2 page requirement). Please attempt to keep your
answers void of bias and strictly based on the philosophies you choose (aka I don’t want to read
a political rant).
The philosophies that you can choose from are:
1) Utilitarianism (greater good)
2) Deontology (follows the rules)
3) Natural Rights (comes with birth, not made by law)
4) Virtue (goodness, kindness)
5) Consequentialism (ends justifies the means)

Ecosystem And Economics Brochure

Imagine that you work for a conservation group and have been asked to provide educational material on how humans impact ecosystems.
Create a brochure using the Brochure Builder to create a brochure with 6 panels about human society’s impact on ecosystems and the costs and benefits of human enterprise. Include the following:

  • Explain how ecosystem degradation and loss is caused by human society.
  • Describe the effects of human activity on plants, animals, and ecosystem dynamics. Provide specific examples.
  • Describe the economic decisions underlying conservation and exploitation. Explain the costs and benefits of human enterprise in terms of ecosystems and provide specific examples.
  • Describe some actions that society can take to help conserve ecosystems and prevent degradation and loss based on our activities.

Use images as appropriate.
Cite at least two references consistent with APA guidelines.
Submit your assignment.
Resources

Ecosystem And Economics Brochure

Imagine that you work for a conservation group and have been asked to provide educational material on how humans impact ecosystems.
Create a brochure using the Brochure Builder to create a brochure with 6 panels about human society’s impact on ecosystems and the costs and benefits of human enterprise. Include the following:

  • Explain how ecosystem degradation and loss is caused by human society.
  • Describe the effects of human activity on plants, animals, and ecosystem dynamics. Provide specific examples.
  • Describe the economic decisions underlying conservation and exploitation. Explain the costs and benefits of human enterprise in terms of ecosystems and provide specific examples.
  • Describe some actions that society can take to help conserve ecosystems and prevent degradation and loss based on our activities.

Use images as appropriate.
Cite at least two references consistent with APA guidelines.
Submit your assignment.
Resources

MICROECONOMICS WRITING ASSIGNMENT

MICROECONOMICS WRITING ASSIGNMENT # 1     Directions: Complete the following writing assignment using complete sentences and in paragraph form.  Include a works cited section in your assignment.  Assignment should be approximately 1,500 words (3 pages single spaced (6 pages double spaced), 1 inch margins, 12 point Times New Roman in Microsoft Word).  Type, print out assignment and turn in by due date.   Writing Assignment Topic: Define and explain economics and scarcity.  Give examples of situations where you have to make economic decisions in your everyday life.  Compare and contrast the main points of macroeconomics and microeconomics, including real world examples.  Explain the principle of opportunity cost in detail including a real world example for a business or industry and also examples in your everyday life.   Acceptable Sources:   ​Microeconomics, 21th Edition; McConnell, Brue, and Flynn, McGraw-Hill Publishers (or editions 18,19,20) ​Macroeconomics, 21th Edition; McConnell, Brue, and Flynn, McGraw-Hill Publishers (or editions ​18,19,20) ​Course Powerpoint Slides (include the section title) ​www.bea.gov (Bureau of Economic Analysis) ​www.bls.gov (Bureau of Labor Statistics) ​www.irs.gov (Internal Revenue Service) ​https://www.barrons.com/market-data   Rubric for Assignment:   ​CONTENT:​80%   ​This includes:  Complete; answers all parts of assignment ​Good detail and explanation provided in your answers ​Use of examples to demonstrate grasp of concepts ​ ​INSTRUCTIONS & FORMAT:  20%   ​This includes:​Following all instructions/directions of assignment ​Correct format: APA, MLA or Chicago, works cited included ​Sources cited throughout paper (or footnoted) ​Good spelling, grammar and punctuation ​Submitted in a word doc or PDF thru BlackBoard by the assigned date ​  ​TOTAL: ​100%       ​Works Cited

MICROECONOMICS WRITING ASSIGNMENT

MICROECONOMICS WRITING ASSIGNMENT # 1     Directions: Complete the following writing assignment using complete sentences and in paragraph form.  Include a works cited section in your assignment.  Assignment should be approximately 1,500 words (3 pages single spaced (6 pages double spaced), 1 inch margins, 12 point Times New Roman in Microsoft Word).  Type, print out assignment and turn in by due date.   Writing Assignment Topic: Define and explain economics and scarcity.  Give examples of situations where you have to make economic decisions in your everyday life.  Compare and contrast the main points of macroeconomics and microeconomics, including real world examples.  Explain the principle of opportunity cost in detail including a real world example for a business or industry and also examples in your everyday life.   Acceptable Sources:   ​Microeconomics, 21th Edition; McConnell, Brue, and Flynn, McGraw-Hill Publishers (or editions 18,19,20) ​Macroeconomics, 21th Edition; McConnell, Brue, and Flynn, McGraw-Hill Publishers (or editions ​18,19,20) ​Course Powerpoint Slides (include the section title) ​www.bea.gov (Bureau of Economic Analysis) ​www.bls.gov (Bureau of Labor Statistics) ​www.irs.gov (Internal Revenue Service) ​https://www.barrons.com/market-data   Rubric for Assignment:   ​CONTENT:​80%   ​This includes:  Complete; answers all parts of assignment ​Good detail and explanation provided in your answers ​Use of examples to demonstrate grasp of concepts ​ ​INSTRUCTIONS & FORMAT:  20%   ​This includes:​Following all instructions/directions of assignment ​Correct format: APA, MLA or Chicago, works cited included ​Sources cited throughout paper (or footnoted) ​Good spelling, grammar and punctuation ​Submitted in a word doc or PDF thru BlackBoard by the assigned date ​  ​TOTAL: ​100%       ​Works Cited

Microeconomics: Market Analysis

Microeconomics: Market Analysis
Objective: One of the primary goals of this course it to apply relevant course concepts/theories to real world events. In addition to the article analysis, this final project will instruct students to continue to apply these theories.
The primary portion of the final project will be a market analysis. As we have discussed in class, markets form the foundation of our course and drive almost all of our discussions. This type of market analysis represents the core of the final project.
This project will be relatively free form. However, students should utilize these guidelines to ensure their work is complete:
Introduction: The 1st step of this project is to choose a specific product offered by 1 company for your market analysis. I highly recommend that students choose a market that they are interested in.
For example, Professor Tung may choose the market for the video game handheld/console hybrid: the Nintendo Switch or the figure-to-life product: amiibo.
The introduction should include a recent history of the market. This information can include sales data, recent mergers, stock prices, new products/competitors, profit reports, a more in-depth history of the company, or any other information that will introduce this product to me. Do not feel constricted to use only this information. If other pertinent information is found, please include it in your overall market analysis. Additionally, I highly encourage students to use visual aids (graphs, profit reports, pictures of relevant figures, etc.)
Application of Course Concepts: We will cover many different topics throughout this course. Students will be required to use these concepts to analyze their chosen market. Please make sure to reference material from the entire course to more fully understand this market. For instance, the market forces of supply & demand, elasticity, surplus analysis and the efficiency of markets, international trade, and externalities.
In addition, future topics include the costs of production, firms in a competitive market, monopoly, monopolistic competition, & oligopoly. These topics will allow for in-depth analysis of the market in which student’s chosen company competes in.
 
Not all of these topics will be relevant for each student’s market analysis. However, students should attempt to maximize the relevant course concepts that are referenced. There are many ways that students can incorporate key concepts from class including graphical analysis, anecdotes, benefit/cost charts, and research statements. The work you have been doing on your article analyses will also bolster this aspect of the final project.
Examples of methods of incorporating key course concepts into your final project:
Analyzing a graph with sales data to demonstrate how the market has fluctuated over a short or long period of time. What was the cause?
Referencing elasticity to explain market fluctuations. How does the relative response of consumers or producers affect market outcomes? This is a great method to demonstrate the validity of our relevant course concepts.
Have taxes had a big impact in your market? What about international trade? Support your statements with graphs, visuals, and strong critical thinking.
Recommendations for Company: The primary purpose of this project is for students to utilize relevant course concepts to derive valuable conclusions. These conclusions should aid companies in making decisions. One primary way that this information can be presented is with a S.W.O.T. report.
S.W.O.T. stands for:
Strengths: What are the strengths of the company/product? In other words, does this company have a comparative advantage or other particular abilities this company may have in the production of your chosen product.
Weaknesses: On the other hand, what are the weaknesses this company may have? Do you believe that there are any deficiencies in terms of production capability, marketing, competitive position, or elsewhere?
Opportunities: Are there opportunities for this company to expand in this market or into another one altogether? Expand on these thoughts.
Threats: What kind of threats will this company potentially encounter? These threats may take the form of additional competition (domestic or foreign), government regulations, political turmoil, or shifts in sectors/industry.
-Your statements in your S.W.O.T. analysis should be comprehensive, precise, and well-formed. Companies require this kind of in-depth analysis when making decisions.
If you would like to create your own, original statements for your recommendations, that is also acceptable. However, I highly recommend that you see me to double check if your statements are appropriate if you choose to do so.
General Recommendations:
-Make sure to be highly professional in terms of wording, formatting, and presentation. Creating professional work is a valuable asset to have upon graduation.
-The length and form of this project is up to students. Though this is unorthodox, I believe students will benefit from having more freedom in terms of decision-making related to this final project.
-Please cite your sources using MLA format at the end of your final project.
Grading: The syllabus states that together the final exam and the final project will be worth 30% of your overall grade.
-Final Project: Will be worth 20% of your overall grade.
-Final Exam: Will be worth 10% of your overall grade.
Due Date: The final project will be due on the last day of the semester: Thursday, September 22, 2018

International Economics

International Economics,
1-Suppose an hour’s labor produces 4 kg of rice and 8 meter of cloth in Nepal, and     2 kg and 8 meter in  Bangladesh. Using opportunity costs, explain which country will export cloth and which will export rice in trade? If you think Nepal and Bangladesh should trae rice and cloth, what principle you borrowed from Ricardo did you use? Discuss.   2-A country produces two crops – barley and wheat. Given the price of barley (Pb) and wheat (Pw), the relationship of labor allocation is shown as MLPb x Pb = MLPw x Pw = w, where MLPb and MLPw are marginal products of labor for the two. Suppose after opening up to trade wheat’s price increases by 15 percent and   barley’s price increases by 8 percent; in what percentages (any “possible” number) the wage increases and how the income distribution changes after opening up to trade?

International Economics

International Economics,
1-Suppose an hour’s labor produces 4 kg of rice and 8 meter of cloth in Nepal, and     2 kg and 8 meter in  Bangladesh. Using opportunity costs, explain which country will export cloth and which will export rice in trade? If you think Nepal and Bangladesh should trae rice and cloth, what principle you borrowed from Ricardo did you use? Discuss.   2-A country produces two crops – barley and wheat. Given the price of barley (Pb) and wheat (Pw), the relationship of labor allocation is shown as MLPb x Pb = MLPw x Pw = w, where MLPb and MLPw are marginal products of labor for the two. Suppose after opening up to trade wheat’s price increases by 15 percent and   barley’s price increases by 8 percent; in what percentages (any “possible” number) the wage increases and how the income distribution changes after opening up to trade?