2), Airbus and Boeing, in the market. Each firm’s cost is MC=AC=20. The market demand is Q=100-(1/2) P. Both firms simultaneously select quantities. a) Find each firm’s reaction function. b) Find a pure Cournot Nash Equilibrium (NE). Show the market quantity and price (Q and P), each firm’s quantity and profit (qi and I, i=Airbus, Boeing), producer surplus (PS) and consumer surplus (CS) in the NE.
2), Airbus and Boeing, in the market. Each firm’s cost is MC=AC=20. The market demand is Q=100-(1/2) P. Both firms simultaneously select quantities. a) Find each firm’s reaction function. b) Find a pure Cournot Nash Equilibrium (NE). Show the market quantity and price (Q and P), each firm’s quantity and profit (qi and I, i=Airbus, Boeing), producer surplus (PS) and consumer surplus (CS) in the NE.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.3P
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J 4
(Cournot Model) There are two firms (N=2), Airbus and Boeing, in the market. Each firm’s cost is MC=AC=20. The market demand is Q=100-(1/2) P. Both firms
simultaneously select quantities.
a) Find each firm’s reaction function.
b) Find a pure Cournot Nash Equilibrium (NE). Show the market quantity and price (Q and P), each firm’s quantity and profit (qi and I, i=Airbus, Boeing), producer surplus (PS) and consumer surplus (CS) in the NE.
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