P = 10,000 - Q, MC (=ATC) = 2,000, MR = TR' = (P*Q)' = 10,000 - 2Q.
a) If the travel agencies try to coordinate their actions, set the price and quantity like a single monopolist and split the resulting profit equally, then the profit-maximizing quantity is at point where MR = MC, so:
10,000 - 2Q = 2,000,
2Q = 8,000,
Q = 4,000 units,
P = 10,000 - 4,000 = BAM 6,000.
The profit for each travel agency is:
TP = (P - ATC)*Q/2 = (6,000 - 2,000)*4,000/2 = BAM 8,000,000.
b) If one of the travel agency, travel agency A, deviates from the plan and sets its P = BAM 4.000. Then the profit of travel agency B is:
TP = (P - ATC)*Q/2 = (4,000 - 2,000)*4,000/2 = BAM 4,000,000.
c) If both travel agencies set price equal to BAM 4.000, and then split profit equally, then the profit for each travel agency is:
TP = (P - ATC)*Q/2 = (4,000 - 2,000)*4,000/2 = BAM 4,000,000.
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