Consider an oligopoly with three firms that produce a homogeneous product. The market demand for the industry is Q = 120 - P. Market supply is determined by the output decisions of the firms. That is, Q = q1 + q2 + q3, where qi is the output of firm i. Each firm can produce at zero cost, and the firms behave non-cooperatively in deciding their output levels. A) Find the Cournot equilibria in this industry. B) What are the profits of each firm? C) Would (any) two firms have an incentive to merge, effectively converting the industry into a duopoly? (Justify your answer.)
Consider an oligopoly with three firms that produce a homogeneous product. The market demand for the industry is Q = 120 - P. Market supply is determined by the output decisions of the firms. That is, Q = q1 + q2 + q3, where qi is the output of firm i. Each firm can produce at zero cost, and the firms behave non-cooperatively in deciding their output levels. A) Find the Cournot equilibria in this industry. B) What are the profits of each firm? C) Would (any) two firms have an incentive to merge, effectively converting the industry into a duopoly? (Justify your answer.)
Chapter10: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 9SQP
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Consider an oligopoly with three firms that produce a homogeneous product. The market
A) Find the Cournot equilibria in this industry.
B) What are the profits of each firm?
C) Would (any) two firms have an incentive to merge, effectively converting the industry into a duopoly? (Justify your answer.)
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