Suppose two firms compete as Cournot Oligopolists. The profit functions of these two firms are π_1=(150-q_1-q_2 ) q_1-20q_1 π_2=(150-q_1-q_2 ) q_2-22q_2 Which generate the following best response functions. q_1=(150-20)/2-1/2 q_2 q_2=(150-20)/2-1/2 q_1 a. Plot these reaction functions in a graph with q1 on the horizontal axis and q2 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 π_1=(150-q_1-q_2 ) q_1-20q_1 π_2=(150-q_1-q_2 ) q_2-22q_2 Which generate the following best response functions. q_1=(150-20)/2-1/2 q_2 q_2=(150-20)/2-1/2 q_1 a. Plot these reaction functions in a graph with q1 on the horizontal axis and q2 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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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| Instructions: Answer to the best of your ability. Show all of your work, the details, on this excel tab. | |
| Suppose two firms compete as Cournot Oligopolists. The profit functions of these two firms are | |
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| Which generate the following best response functions. | |
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| a. Plot these reaction functions in a graph with q1 on the horizontal axis and q2 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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