Oligopoly: Quantity Competition 1. Consider two duopolists who each have a constant marginal cost c1 = c2 = 2 and face inverse demand P = 4 – Q,where Q = Q1 + Q2 is the total output of both firms. 1. Find the Cournot equilibrium quantity for each firm, the resulting market price, and the profits for each firm. 2. Find the Stackelberg equilibrium quantities for each firm, and the price, and the profits for each firm supposing that Firm 1 is the industry leader.

Oligopoly: Quantity Competition 1. Consider two duopolists who each have a constant marginal cost c1 = c2 = 2 and face inverse demand P = 4 – Q,where Q = Q1 + Q2 is the total output of both firms. 1. Find the Cournot equilibrium quantity for each firm, the resulting market price, and the profits for each firm. 2. Find the Stackelberg equilibrium quantities for each firm, and the price, and the profits for each firm supposing that Firm 1 is the industry leader.

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Question

Oligopoly: Quantity Competition
1. Consider two duopolists who each have a constant marginal cost c = c2 = 2 and face inverse
demand P = 4 – Q,where Q = Q1 + Q2 is the total output of both firms.
1. Find the Cournot equilibrium quantity for each firm, the resulting market price, and the
profits for each firm.
2. Find the Stackelberg equilibrium quantities for each firm, and the price, and the profits for
each firm supposing that Firm 1 is the industry leader.

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