Consider the quantity competition between two firms, A and B, in 380 — 2QA - Qв, where P denotes the market price, QA denotes the quantity supplied by firm A, and QB denotes the quantity supplied by firm B. The per-unit production cost of firm A is 20, and the per-unit production cost of firm B is 26. Each of the two firms simultaneously decides its own quantity to maximize its own 1. a market with inverse demand function P profit. (a) Derive the best-response functions for the two firms. (b) Find the Nash equilibrium and draw a graph to illustrate.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Consider the quantity competition between two firms, A and B, in
380 – 2QA - QB; where P
1.
a market with inverse demand functionP =
denotes the market price, QA denotes the quantity supplied by firm A, and
QB denotes the quantity supplied by firm B. The per-unit production cost
of firm A is 20, and the per-unit production cost of firm B is 26. Each of
the two firms simultaneously decides its own quantity to maximize its own
profit.
(a)
Derive the best-response functions for the two firms.
(b)
Find the Nash equilibrium and draw a graph to illustrate.
Transcribed Image Text:Consider the quantity competition between two firms, A and B, in 380 – 2QA - QB; where P 1. a market with inverse demand functionP = denotes the market price, QA denotes the quantity supplied by firm A, and QB denotes the quantity supplied by firm B. The per-unit production cost of firm A is 20, and the per-unit production cost of firm B is 26. Each of the two firms simultaneously decides its own quantity to maximize its own profit. (a) Derive the best-response functions for the two firms. (b) Find the Nash equilibrium and draw a graph to illustrate.
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