3. The (market) inverse demand function for a good is as follows: Pp(q) = {12-2q if g € (0,6], if q> 6. There are two firms: N = {1,2}. Each firm's cost function is such that producing r units of the good incurs cost 2r. We consider the Cournot competition of the two firms. That is, they simultaneously choose their quantities. The firms are profit-maximizers. (1) Find a Nash equilibrium. (2) What is the size of the deadweight loss incurred by the Duopoly, compared to the competitive equilibrium allocation?

3. The (market) inverse demand function for a good is as follows: Pp(q) = {12-2q if g € (0,6], if q> 6. There are two firms: N = {1,2}. Each firm's cost function is such that producing r units of the good incurs cost 2r. We consider the Cournot competition of the two firms. That is, they simultaneously choose their quantities. The firms are profit-maximizers. (1) Find a Nash equilibrium. (2) What is the size of the deadweight loss incurred by the Duopoly, compared to the competitive equilibrium allocation?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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