2. Walmart (firm 1) and Amazon (firm 2) are a duopoly in the grocery market. They are faced with an inverse demand of P(Q1,Q2) = 4 – 2(Q1 + Q2) and total costs of TC(Q;) = 2Q?, i = 1, 2. Note that the marginal cost is not constant! 1. Obtain the Cournot equilibrium quantities and profits.

2. Walmart (firm 1) and Amazon (firm 2) are a duopoly in the grocery market. They are faced with an inverse demand of P(Q1,Q2) = 4 – 2(Q1 + Q2) and total costs of TC(Q;) = 2Q?, i = 1, 2. Note that the marginal cost is not constant! 1. Obtain the Cournot equilibrium quantities and profits.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2. Walmart (firm 1) and Amazon (firm 2) are a duopoly in the grocery market. They are faced
with an inverse demand of P(Q1, Q2) = 4 – 2(Q1+ Q2) and total costs of TC(Q;) = 2Q?, i = 1, 2.
Note that the marginal cost is not constant!
1. Obtain the Cournot equilibrium quantities and profits.
2. Obtain the Stackelberg equilibrium in which Walmart moves first. Compare with the Cournot
equilibrium.
3. Obtain the cartel outcome (= shared monopoly). Compare with Stackelberg and Cournot.

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