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Category > Economics Posted 03 May 2017 My Price 6.00

EXERDISE 1

EXERDISE 1 Model of on Aid-toes Market American Airlines and United Airlines compete for customers on flights between lChicago
and Los Angeles. The total number of passengers flown by these two firms (per quar—
ter}, :3, is the sum of the number of passengers flown on American, 13,1, and those flown
on United, qy. Assume no other companies can enter. The flight Chicago—[es Ange—
les costs each airline $147 per passenger. Let p be the price per passenger in dollars.
Suppose that the demand fimction is clip} 2 339 — p. {1} 1f American were a. monopoly, what would its optimal quantity and price be?
What would its profit be? (2} 1n the duopolg,r described above, what is the Cournot equilibrium price for this
industry? What is each airline’s profits? {3} If American were to more first, and United second, what would be the Stackelberg
equilibrium quantities? price? profits? (3} Consider a situation where American and United would form an alliance, called
AUA, which behaves as a. monopolist on this market. What would AUA optimal
quantity be? What would be the resulting price? What would its profit be? As—
suming each Airline gets half of AUA’s profits, what would each Airline’s profit be? Are thme profits greater than their profits in the duopol},r {both lCournot and
Stackelberg]?

Answers

SuperTutor
(15)
Status NEW Posted 03 May 2017 03:05 AM My Price 6.00

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