ECON - 3742, section A01-Winter 2022 Assignment #2 INDUSTRIAL ORGANIZATION AND FIRM STRATEGY
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INDUSTRIAL ORGANIZATION AND FIRM STRATEGY
ECON - 3742, section A01-Winter 2022
Assignment #2
Matching questions (10 points)
From the bank of terms match the letter that corresponds to the appropriate concept/description.
|
Bank of terms |
Letter |
|
Perfect Bayesian Nash equilibrium |
A |
|
Bayesian Nash equilibrium |
B |
|
Nash equilibrium |
C |
|
Competition ‡ la Cournot |
D |
|
Competition ‡ la Bertrand |
E |
|
HerÖndahl index |
F |
|
Perfect competition |
G |
|
Consumer surplus |
H |
|
Lerner index |
I |
|
Principal-agent model |
J |
|
Natural monopoly |
K |
|
Strategic complements |
L |
|
Conjectural variations approach |
M |
|
Strategic substitutes |
N |
|
Concept/description |
Write letter |
|
Competition in quantities |
____ |
|
Price taking behavior |
____ |
|
Index of maket power |
____ |
|
Measure of welfare |
____ |
|
Solution for a static game with incomplete information |
____ |
|
Competition in prices |
____ |
|
Measure of intensity of competition |
____ |
|
Manager and business owner work relationship |
____ |
|
Best response functions that slope upwards |
____ |
|
Estimation of market power |
____ |
Ans/ The correct matching of concept/description with term.
|
Concept |
Write letter |
|
Competition in quantities |
__D __ |
|
Price taking behavior |
__ G __ |
|
Index of maket power |
__F __ |
|
Measure of welfare |
__H __ |
|
Solution for a static game with incomplete information |
__B __ |
|
Competition in prices |
__E __ |
|
Measure of intensity of competition |
__I __ |
|
Manager and business owner work relationship |
__J __ |
|
Best response functions that slope upwards |
__L__ |
|
Estimation of market power |
__M __ |
Completion questions (10 points)
1. In the ________ Bertrand duopoly with identical and constant identical marginal costs, the equilib- rium is such that Örms set prices ______ marginal costs and thus _______ market power.
a. homogeneous product; above; do not enjoy any
b. di§erentiated product; equal to; do not enjoy any
c. homogeneous product; equal to; do not enjoy any
d. di§erentiated product; equal to; enjoys Ans/ c (lesson 3.1)
2. If products are __________, Örms ________ market power.
a. more di§erentiated; attain less
b. less di§erentiated; attain more
c. more di§erentiated; do not attain more
d. more di§erentiated; attain more Ans/ d (lesson 3.3)
3. In a _______ price competition model with homogeneous products and _________ about mar- ginal costs, Örms set price _______ marginal costs and make strictly positive expected proÖts in equi- librium.
a. Bertrand; private information; above
b. Bertrand; public information; above
c. Cournot; private information; equal to
d. Cournot; private information; above Ans/ a (lesson 3.2)
4. Under imperfect competition with ___________ and horizontaly di§erentiated products, the Örm with ______ quality or _______ marginal costs sells _______units from a welfare perspective.
a. price competition ‡ la Hotelling; higher; lower; too few
b. quantity competition ‡ la Hotelling; higher; lower; too few
c. quantity competition ‡ la Cournot; higher; higher; too few
d. price competition ‡ la Hotelling; lower; lower; too many Ans/ a (lesson 3.4)
5. The n-Örm ___________ model _________ perfect competition as the number of Örms
_______.
a. asymmetric linear Bertrand; converges to; decreases
b. symmetric linear Cournot; converges to; increases
c. symmetric non linear Cournot; diverges from; decreases
d. symmetric non linear Bertrand; diverges from; increases Ans/ b (lesson 3.6)
6. In the linear_________ model with homogeneous products, the _________ index is an _________ measure of market power since it captures the average markup in equilibrium.
a. Cournot; HerÖndahl; appropriate
b. Bertrand; HerÖndahl; inappropriate
c. Cournot; Lerner; appropriate
d. Bertrand; Lerner; inappropriate Ans/ a (lesson 3.7)
7. In the homogeneous product case, price is higher, quantity is ________ and proÖts are higher under _____ competition than under ________ competition.
a. lower; price; quantity
b. higher; quantity; price
c. higher; price; quantity
d. lower; quantity; price Ans/ d (lesson 3.9)
8. ____ as the strategic variable for a Örm gives rise to a _________ outcome than ______ as the strategic variable.
a. Price; more competitive; quantity
b. Quantity; more competitive; price
c. Price; less competitive; quantity
d. Quantity; less competitive; price Ans/ a (lesson 3.11)
2022-04-19