Assume that there are two companies (A) and (B) acting as Cournot duopolists in an industry, where there are very high barriers to entry. The two companies behave strategically by choosing output levels, produce a homogeneous product, and have constant marginal costs. Marginal cost for company A is £10 and for company B is £20. Fixed cost is zero for both companies. The whole industry demand is given by Q = 390-P. Q4 a) Find the Cournot - Nash equilibrium output levels for each of the two companies. Find the market price and total output. You need to show all your working/ calculations step-by-step, each step has a sub-mark.

Assume that there are two companies (A) and (B) acting as Cournot duopolists in an industry, where there are very high barriers to entry. The two companies behave strategically by choosing output levels, produce a homogeneous product, and have constant marginal costs. Marginal cost for company A is £10 and for company B is £20. Fixed cost is zero for both companies. The whole industry demand is given by Q = 390-P. Q4 a) Find the Cournot - Nash equilibrium output levels for each of the two companies. Find the market price and total output. You need to show all your working/ calculations step-by-step, each step has a sub-mark.

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

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

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