A6 In Changlun, Kedah, there are two bakers, Abu and Bakar. Their bread taste the same and nobody can tell the difference. Abu has constant marginal costs of RM1 per loaf of bread. Bakar has constant marginal costs of RM2 per loaf. Fixed costs are zero for both of them. The inverse demand function for bread in Changlun is p(q) = 6 – 0.01(qA + qB), where q is the total number of loaves sold per day. Find the reaction function for Abu and Bakar. What is the Cournot Nash equilibrium number of loaves of bread for each baker?
A6 In Changlun, Kedah, there are two bakers, Abu and Bakar. Their bread taste the same and nobody can tell the difference. Abu has constant marginal costs of RM1 per loaf of bread. Bakar has constant marginal costs of RM2 per loaf. Fixed costs are zero for both of them. The inverse demand function for bread in Changlun is p(q) = 6 – 0.01(qA + qB), where q is the total number of loaves sold per day. Find the reaction function for Abu and Bakar. What is the Cournot Nash equilibrium number of loaves of bread for each baker?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A6
In Changlun, Kedah, there are two bakers, Abu and Bakar. Their bread taste
the same and nobody can tell the difference. Abu has constant marginal costs of RM1 per loaf
of bread. Bakar has constant marginal costs of RM2 per loaf. Fixed costs are zero for both of
them. The inverse demand function for bread in Changlun is p(q) = 6 – 0.01(qA + qB), where q
is the total number of loaves sold per day. Find the reaction function for Abu and Bakar. What
is the Cournot Nash equilibrium number of loaves of bread for each baker?
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