1. Consider a market with three firms (i = 1, 2, 3), which have identical marginal costs c = c2 = C3 = 0. The inverse demand function is given by p =1- Q, where Q = 91 + 92 + q3. a. Compute the Cournot equilibrium, i.e., the market price and quantity. b. Assume that two of the three firms merge. Show that the profit of merging firms decreases. c. What happens to the market price if all three firms merge compared to part (a)?

1. Consider a market with three firms (i = 1, 2, 3), which have identical marginal costs c = c2 = C3 = 0. The inverse demand function is given by p =1- Q, where Q = 91 + 92 + q3. a. Compute the Cournot equilibrium, i.e., the market price and quantity. b. Assume that two of the three firms merge. Show that the profit of merging firms decreases. c. What happens to the market price if all three firms merge compared to part (a)?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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