Suppose two firms compete as Cournot Oligopolists. The profit functions of these two firms are IT = (150 – 91 - 92)91 – 20q1 T2 = (150 – 91 – 92)92 – 2292 Which generate the following best response functions. 150 – 20 1 91 = 2 150 – 20 1 92 = 2 a. Plot these reaction functions in a graph with q, on the horizontal axis and q, on the vertical axis. b. Derive, I want to see your work, the Nash equilibrium outcome of this game. c. How does the Nash equilibrium change if the demand curve shifts out, a bigger intercept on the demand equation.

Suppose two firms compete as Cournot Oligopolists. The profit functions of these two firms are IT = (150 – 91 - 92)91 – 20q1 T2 = (150 – 91 – 92)92 – 2292 Which generate the following best response functions. 150 – 20 1 91 = 2 150 – 20 1 92 = 2 a. Plot these reaction functions in a graph with q, on the horizontal axis and q, on the vertical axis. b. Derive, I want to see your work, the Nash equilibrium outcome of this game. c. How does the Nash equilibrium change if the demand curve shifts out, a bigger intercept on the demand equation.

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

option c

Suppose two firms compete as Cournot Oligopolists. The profit
functions of these two firms are
п — (150 — q —92)91 — 209,
T2 = (150 – 91 – 92)92 – 2292
Which generate the following best response functions.
150 – 20 1
91 =
2
150 – 20 1
92 =
2
a. Plot these reaction functions in a graph with q, on the horizontal axis
and q, on the vertical axis.
b. Derive, I want to see your work, the Nash equilibrium outcome of
this game.
c. How does the Nash equilibrium change if the demand curve shifts out,
a bigger intercept on the demand equation.

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