An industry contains two firms producing homogenous goods, one whose cost function is C(Q1) = 30Q1 and another whose cost function is C(Q2) = 30Q2. The demand function for the market is given by: P = 65 - QT where QT = Q1 + Q2. a. Assuming firms are choosing quantities according to the Cournot model, what is each firm’s reaction function? b. Graph each firm’s reaction curve (on same graph). c. How much does each firm produce in the Nash equilibrium of Cournot's model?
An industry contains two firms producing homogenous goods, one whose cost function is C(Q1) = 30Q1 and another whose cost function is C(Q2) = 30Q2. The demand function for the market is given by: P = 65 - QT where QT = Q1 + Q2. a. Assuming firms are choosing quantities according to the Cournot model, what is each firm’s reaction function? b. Graph each firm’s reaction curve (on same graph). c. How much does each firm produce in the Nash equilibrium of Cournot's model?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 1E
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An industry contains two firms producing homogenous goods, one whose cost
function is C(Q1) = 30Q1 and another whose cost function is C(Q2) = 30Q2. The demand
function for the market is given by:
P = 65 - QT where QT = Q1 + Q2.
a. Assuming firms are choosing quantities according to the Cournot model, what is
each firm’s reaction function?
b. Graph each firm’s reaction curve (on same graph).
c. How much does each firm produce in the Nash equilibrium of Cournot's model?
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