Analysts have estimated the inverse market demand in a homogeneous-product Cournot duopoly to be P= 150-3 (Q₁ + Q2). They estimate costs to be C₁(Q₁)= 18Q₁ and C₂(Q2) = 30Q2. a. Determine the reaction function for each firm. Firm 1: Q₁ = Firm 2: Q₂ = Firm 2: Q2 b. Calculate each firm's equilibrium output. Firm 1: Q₁ c. Calculate the equilibrium market price. Firm 2: $ d. Calculate the profit each firm earns in equilibrium. Firm 1: $

Analysts have estimated the inverse market demand in a homogeneous-product Cournot duopoly to be P= 150-3 (Q₁ + Q2). They estimate costs to be C₁(Q₁)= 18Q₁ and C₂(Q2) = 30Q2. a. Determine the reaction function for each firm. Firm 1: Q₁ = Firm 2: Q₂ = Firm 2: Q2 b. Calculate each firm's equilibrium output. Firm 1: Q₁ c. Calculate the equilibrium market price. Firm 2: $ d. Calculate the profit each firm earns in equilibrium. Firm 1: $

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 1
Consider a Bertrand duopoly with inverse demand of P(Q) = 20 – Q, where Q = q4 + qB and firm A is the leader. Each firm has costs of MC = AC = 4. Answer the following questions: 1.What are the reaction functions of each firm? 2.What is the Bertrand equilibrium amount of units sold by each firm? 3.What is the market quantity and price?