1.4. Suppose there are ŉ firms in the Cournot oligopoly model. Let q; denote the quantity produced by firm i, and let Q = 9₁ +...+ In denote the aggregate quantity on the market. Let P denote the market-clearing price and assume that inverse demand is given by P(Q) = a - Q (assuming Q < a, else P = 0). Assume that the total cost of firm i from producing quantity q; is Ci(qi) = cq;. That is, there are no fixed costs and the marginal cost is constant at c, where we assume c < a. Following Cournot, suppose that the firms choose their quantities simultaneously. What is the Nash equilibrium? What happens as n approaches infinity?

1.4. Suppose there are ŉ firms in the Cournot oligopoly model. Let q; denote the quantity produced by firm i, and let Q = 9₁ +...+ In denote the aggregate quantity on the market. Let P denote the market-clearing price and assume that inverse demand is given by P(Q) = a - Q (assuming Q < a, else P = 0). Assume that the total cost of firm i from producing quantity q; is Ci(qi) = cq;. That is, there are no fixed costs and the marginal cost is constant at c, where we assume c < a. Following Cournot, suppose that the firms choose their quantities simultaneously. What is the Nash equilibrium? What happens as n approaches infinity?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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