Consider a Cournot model. The market demand is p = 150 - q1 - q2. Firm 1's marginal cost is 30,...
Question:
Consider a Cournot model. The market demand is {eq}p = 150 - q_{1} - q_{2} {/eq}. Firm 1's marginal cost is 30, and firm 2's marginal cost is also 30. There are no fixed costs.
(a) Derive the best response function for each firm.
(b) Find the Nash Equilibrium and the equilibrium market price.
(c) Find each firm's equilibrium profit.
(d) Find the consumer surplus at the market equilibrium.
Cournot-Nash Equilibrium:
In a Cournot Oligopoly game, two firms simultaneously choose the quantity of output to supply, taking as given the output chosen by the other firm. The equilibrium in this game also constitutes a Nash equilibrium, hence the name.
Answer and Explanation: 1
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View this answer(a) The best response function for each firm is derive by choosing the output that maximizes profit, given output by the other firm. The...
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