19-2

(Sol) Solution file will be distributed in two parts. Problem 15-6, 7 will not be discussed.

III. Additional questions on oligopoly: Suppose there are two firms producing pumpkins in a country,

Carl and Simon. Market demand function in each period is given by Q = 3,200 - 1,600p. Naturally, Q =

QC + QS, where QC is the units of pumpkins produced by Carl and Q S is the units of pumpkins produced

by Simon. Cost of producing pumpkins for either firm is $0.5 per pumpkin.

1. Suppose that every spring, the snow thaws off of Carl's pumpkin field one week earlier before it thaws

off of Simon's. Therefore, Carl can plant his pumpkins a week earlier than Simon.

(1)Suppose that Carl plants QC units. How many units will Simon plant?

(Sol) Answer can be calculated by deriving reaction function for Simon. By definition, reaction function

(best response) for firm A is the profit-maximizing output given opposing firm's output. Since profit for

Simon is and , profit function for Simon becomes19-2

(Sol) Solution file will be distributed in two parts. Problem 15-6, 7 will not be discussed.

III. Additional questions on oligopoly: Suppose there are two firms producing pumpkins in a country,

Carl and Simon. Market demand function in each period is given by Q = 3,200 - 1,600p. Naturally, Q =

QC + QS, where QC is the units of pumpkins produced by Carl and Q S is the units of pumpkins produced

by Simon. Cost of producing pumpkins for either firm is $0.5 per pumpkin.

1. Suppose that every spring, the snow thaws off of Carl's pumpkin field one week earlier before it thaws

off of Simon's. Therefore, Carl can plant his pumpkins a week earlier than Simon.

(1)Suppose that Carl plants QC units. How many units will Simon plant?

(Sol) Answer can be calculated by deriving reaction function for Simon. By definition, reaction
function (best response) for firm A is the profit-maximizing output given opposing firm's output.
Since profit for Simon is and , profit function for Simon becomes