31. The market structure for a software product called Wrowserware is oligopoly (more precisely, duopoly). There are only two firms, Firm 1 and Firm 2, producing exactly the same good. The market demand of this good is P = 100-2(Q₁ + Q₂), where P is market price, Q₁ and Q₂ are quantity produced by Firm 1 and Firm 2 respectively. The cost structure of the two firms are typical of software developer: Producing this good involves only fixed costs. Marginal costs are zero for both firms. (a) What are the marginal revenue functions for Firm 1 and Firm 2 respectively? (b) What are the reaction functions for Firm 1 and Firm 2 respectively? (c) What are the production quantities for Firm 1 and Firm 2 respectively in the Cournot (Nash) equilibrium?
31. The market structure for a software product called Wrowserware is oligopoly (more precisely, duopoly). There are only two firms, Firm 1 and Firm 2, producing exactly the same good. The market demand of this good is P = 100-2(Q₁ + Q₂), where P is market price, Q₁ and Q₂ are quantity produced by Firm 1 and Firm 2 respectively. The cost structure of the two firms are typical of software developer: Producing this good involves only fixed costs. Marginal costs are zero for both firms. (a) What are the marginal revenue functions for Firm 1 and Firm 2 respectively? (b) What are the reaction functions for Firm 1 and Firm 2 respectively? (c) What are the production quantities for Firm 1 and Firm 2 respectively in the Cournot (Nash) equilibrium?
Chapter9: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 11SQP
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Transcribed Image Text:31. The market structure for a software product called Wrowserware is oligopoly
(more precisely, duopoly). There are only two firms, Firm 1 and Firm 2, producing
exactly the same good. The market demand of this good is P = 100 - 2(Q1 + Q2),
where P is market price, Q₁ and Q₂ are quantity produced by Firm 1 and Firm 2
respectively. The cost structure of the two firms are typical of software developer:
Producing this good involves only fixed costs. Marginal costs are zero for both
firms.
(a) What are the marginal revenue functions for Firm 1 and Firm 2
respectively?
(b) What are the reaction functions for Firm 1 and Firm 2 respectively?
(c) What are the production quantities for Firm 1 and Firm 2 respectively in the
Cournot (Nash) equilibrium?
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