### Duopoly Equilibrium and Reaction Functions1) **Calculate the Equilibrium of Linear Asymmetric Cournot Duopoly:** - **Market Setup:** - Price, $ P = a - (q_1 + q_2) $ - No fixed costs - Firm 1 (Eau): Constant marginal cost, $ c_1 $ - Firm 2 (Neu): Constant marginal cost, $ c_2 $ where $ c_1 < c_2 $ - **Tasks:** - Calculate consumer surplus - Determine each firm's profit - Calculate total profit - Assess deadweight loss due to oligopoly2) **Effect of Fixed Cost on Best-Response Functions in a Symmetric Cournot Duopoly:** - Analyze how introducing a fixed cost affects the reaction functions of firms in a market where firms are symmetric (i.e., equal costs).Graphs or diagrams, if present, would typically illustrate demand and cost curves, equilibrium price and quantity, consumer surplus, and deadweight loss areas.

Both firms in the Cournot Duopoly market system maximize their outputs while keeping the output of…

1) Calculate the equilibrium of linear asymmetric Cournot duopoly. That is, assume that P = a - (q1 + q2), that there is no fixed cost, but the marginal cost of each firm differs, i.e., Firm 1 (Eau) has a cosntant marginal cost of c1, and Firm 2 (Neu) has a constant marginal cost of c2 with c1 < c2. Calculate the consumers' suprlus, each firm's profit as well the as total profit, and the deadweight loss due to oligolpoly. 2) How does the existence of fixed cost change the best-response (reaction) functions in a symmetric Cournot duopoly?

1) Calculate the equilibrium of linear asymmetric Cournot duopoly. That is, assume that P = a - (q1 + q2), that there is no fixed cost, but the marginal cost of each firm differs, i.e., Firm 1 (Eau) has a cosntant marginal cost of c1, and Firm 2 (Neu) has a constant marginal cost of c2 with c1 < c2. Calculate the consumers' suprlus, each firm's profit as well the as total profit, and the deadweight loss due to oligolpoly. 2) How does the existence of fixed cost change the best-response (reaction) functions in a symmetric Cournot duopoly?

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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### Duopoly Equilibrium and Reaction Functions

1) **Calculate the Equilibrium of Linear Asymmetric Cournot Duopoly:**

- **Market Setup:**
- Price, $ P = a - (q_1 + q_2) $
- No fixed costs
- Firm 1 (Eau): Constant marginal cost, $ c_1 $
- Firm 2 (Neu): Constant marginal cost, $ c_2 $ where $ c_1 < c_2 $

- **Tasks:**
- Calculate consumer surplus
- Determine each firm's profit
- Calculate total profit
- Assess deadweight loss due to oligopoly

2) **Effect of Fixed Cost on Best-Response Functions in a Symmetric Cournot Duopoly:**

- Analyze how introducing a fixed cost affects the reaction functions of firms in a market where firms are symmetric (i.e., equal costs).

Graphs or diagrams, if present, would typically illustrate demand and cost curves, equilibrium price and quantity, consumer surplus, and deadweight loss areas.

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