. Consider and inverse market demand P(Q) = 10 — 2Q. Suppose there are two firms competing in prices (Bertrand). Compute the equilibrium price set by each firm and the

. Consider and inverse market demand P(Q) = 10 — 2Q. Suppose there are two firms
competing in prices (Bertrand). Compute the equilibrium price set by each firm and
the quantities sold in the equilibrium. Also, compute each firms’ profits in equilibrium
when: (a) Both firms have constant marginal cost equal to c = 5. (b) One firm has marginal cost equal to CH = 5 the other one with marginal cost equal
to cL = 2. (c) One firm has marginal cost equal to CH 2 8 the other one with marginal cost equal
to cL = 2. . Consider and inverse market demand P(Q) = 10 — Q. Suppose there are two firms
competing in prices (Bertrand). One firm has marginal cost equal to CH 2 8 the other
one with marginal cost equal to CL = 2. An inventor has designed a new manufacturing process that would reduce the marginal
cost of production to c = 1. The inventor has three options: (a) Sell the invention to firm 1 only.
(b) Sell the invention to firm 2 only. (c) Sell the invention to both firms. In this case, assume that both firms understand
that the inventor is also selling the invention to their respective rival. In either alternative, the inventor will use a “lump-sum” contract, i.e., it will sell the
invention for a fixed fee F . Compute the inventor’s profit for each licensing alternative.
Which one maximizes the inventor’s payoff? Econ of tech and inno

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