An industry contains two firms producing homogenous goods, one whose cost function is C(Q1) = 30Q1 and another whose cost function is C(Q2) = 30Q2. The demand function for the market is given by: P = 65 - QT where QT = Q1 + Q2. a. Assuming firms are choosing quantities according to the Cournot model, what is each firm’s reaction function? b. Graph each firm’s reaction curve (on same graph). c. How much does each firm produce in the Nash equilibrium of Cournot's model?

An industry contains two firms producing homogenous goods, one whose cost function is C(Q1) = 30Q1 and another whose cost function is C(Q2) = 30Q2. The demand function for the market is given by: P = 65 - QT where QT = Q1 + Q2. a. Assuming firms are choosing quantities according to the Cournot model, what is each firm’s reaction function? b. Graph each firm’s reaction curve (on same graph). c. How much does each firm produce in the Nash equilibrium of Cournot's model?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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