Consider a Cournot duopoly with a demand function of p=10-Q(where Q=q1+q2) and a constant marginal cost of c>0. a) Find the two firms’ best-response functions. b) Find the Nash equilibrium output. c) What happens to the equilibrium market price as c increases (assuming that c remains below 10)? d) What happens to the equilibrium market price if c increases above 10?
Consider a Cournot duopoly with a demand function of p=10-Q(where Q=q1+q2) and a constant marginal cost of c>0. a) Find the two firms’ best-response functions. b) Find the Nash equilibrium output. c) What happens to the equilibrium market price as c increases (assuming that c remains below 10)? d) What happens to the equilibrium market price if c increases above 10?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.5P
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Consider a Cournot duopoly with a demand function of p=10-Q(where Q=q1+q2) and a constant marginal cost of c>0.
a) Find the two firms’ best-response functions.
b) Find the Nash equilibrium output.
c) What happens to the equilibrium market price as c increases (assuming that c remains below 10)?
d) What happens to the equilibrium market price if c increases above 10?
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