Consider a Cournot model in which N firms compete with each other by setting quantities. The market inverse demand function is P = a -1 9i, where a > 0 and qi is the quantity of firm i. Firm i's cost function is quadratic: q, where ci > 0. i=1 (a) (b) Suppose N = 2. Find the Nash equilibrium. Show which firm produces more in the equilibrium and explain your result. Suppose N≥ 2 and ci = c for all i. Find the Nash equilibrium. Show whether the firms produce more or less than the constant marginal cost case where the cost function is cqi, with a >c>0.

Consider a Cournot model in which N firms compete with each other by setting quantities. The market inverse demand function is P = a -1 9i, where a > 0 and qi is the quantity of firm i. Firm i's cost function is quadratic: q, where ci > 0. i=1 (a) (b) Suppose N = 2. Find the Nash equilibrium. Show which firm produces more in the equilibrium and explain your result. Suppose N≥ 2 and ci = c for all i. Find the Nash equilibrium. Show whether the firms produce more or less than the constant marginal cost case where the cost function is cqi, with a >c>0.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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