Consider a Cournot duopoly facing market demand p(Q) = 50 – 4Q. Suppose that firm 1 has cost function C1(q) = 0, and that firm 2 has cost function C2(q) = cq.a) Derive firm 1’s best-response function b1(q2). Derive firm 2’s best-response function b2(q1). Note: Since the firms are asymmetric, you cannot use a symmetry argument.

Consider a Cournot duopoly facing market demand p(Q) = 50 – 4Q. Suppose that firm 1 has cost function C1(q) = 0, and that firm 2 has cost function C2(q) = cq.a) Derive firm 1’s best-response function b1(q2). Derive firm 2’s best-response function b2(q1). Note: Since the firms are asymmetric, you cannot use a symmetry argument.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

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