Here is a market with three firms: 1, 2, and 3. The demand curve isP=100-Q. There is no fixed cost but the marginal cost 10 for all firms.Firm 1 is a leader firm so that it decides the quantity Q1 first. Then twofirms respectively decide their quantities Q2 and Q3 simultaneously.1) At an equilibrium (SPE), Q1 isQ2=Q3=2) At the equilibrium, (the market quantity) Q=and (the marketprice) P=3) The profit of firm 1 iswhile the profit of firm 2 and 3respectively is

Answered: Here is a market with three firms: 1,…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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Here is a market with three firms: 1, 2, and 3. The demand curve is
P=100-Q. There is no fixed cost but the marginal cost 10 for all firms.
Firm 1 is a leader firm so that it decides the quantity Q1 first. Then two
firms respectively decide their quantities Q2 and Q3 simultaneously.
1) At an equilibrium (SPE), Q1 is
Q2=Q3=
2) At the equilibrium, (the market quantity) Q=
and (the market
price) P=
3) The profit of firm 1 is
while the profit of firm 2 and 3
respectively is

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The demand curve is a graphical representation of the relationship between a good's or service's price and the quantity demanded over a given time period. A duopoly occurs when two companies own all, or nearly all, of the market for a specific product or service. A duopoly is the most basic type of oligopoly, defined as a market dominated by a small number of firms. A duopoly is a type of oligopoly in which two firms control a market in a dominant or exclusive manner. Because of its simplicity, it is the most commonly studied type of oligopoly. Duopolies sell to consumers in a competitive market where an individual consumer's choice has no bearing on the firm.

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