1. If a firm has a unique cost advantage, what does the Dominant Firm model say about how that firm will act?
What does Spence's model say?
Be sure to include a discussion of the role of technical progress in this type of industry and give an
example of an industry which you think is explained well by your analysis.
2. How does a Cournot market with two firms adjust in a single period in the short run? What are the short run and
the long run equilibriums? How would the market be different if one firm could reduce its costs but the other
firm could not?
At the beginning of your discussion, assume that at the initial price the two firms divide the entire
quantity demanded in the market equally.
3. Present the model of monopolistic competition. How does a monopolistically competitive market with two
firms find equilibrium? What is the equilibrium in the short run and the long run?
4. Present the following two models of input pricing.
a) the Greenhut-Ohta model of vertical integration (our model of mergers). How do the results compare if
the input supplier sells into different market structures? When do vertical mergers make sense?
b) the Fershtman-Judd model of managerial compensation.