Consider two firms who compete with each other in terms of quantity. If the inverse market demand and total costs of the firms are given by P = 140 – Q TC = 20q, + 10 TC2 = 20q1 + 10 a. Find the Response (Reaction) functions of each curve b. Find the Nash Equilibrium of this Cournot duopoly game c. Graphically represent this equilibrium using their Response (Reaction) curves d. Suppose these two firms collude and form a cartel, what will the equilibrium be under this situation Is the equilibrium under (d) sustainable or not and why? f. Suppose that both firms have agreed that firm 1 is a leader and firm 2 is a follower, find the Nash equilibrium of this sequential game e.

Consider two firms who compete with each other in terms of quantity. If the inverse market demand and total costs of the firms are given by P = 140 – Q TC = 20q, + 10 TC2 = 20q1 + 10 a. Find the Response (Reaction) functions of each curve b. Find the Nash Equilibrium of this Cournot duopoly game c. Graphically represent this equilibrium using their Response (Reaction) curves d. Suppose these two firms collude and form a cartel, what will the equilibrium be under this situation Is the equilibrium under (d) sustainable or not and why? f. Suppose that both firms have agreed that firm 1 is a leader and firm 2 is a follower, find the Nash equilibrium of this sequential game e.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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