In a Cournot duopoly model, the market demand curve is given by P = 100 - yI -y where y, is the amount of output firm 1 produces and y2 is firm 2's level of output. The co- function of firm 1 is c(y1) 75 +8y1. The cost function of firm 2 is c(y2) = 100 +12y2. The reaction function of firm 1 is y1 = - 0.5y2. The reaction function of firm 2 is y2 -0.5y1- In the Cournot equilibrium, firm 2 produces units of output and makes a producer

In a Cournot duopoly model, the market demand curve is given by P = 100 - yI -y where y, is the amount of output firm 1 produces and y2 is firm 2's level of output. The co- function of firm 1 is c(y1) 75 +8y1. The cost function of firm 2 is c(y2) = 100 +12y2. The reaction function of firm 1 is y1 = - 0.5y2. The reaction function of firm 2 is y2 -0.5y1- In the Cournot equilibrium, firm 2 produces units of output and makes a producer

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

See similar textbooks

Similar questions

Consider a Duopoly model, in which two firms decide a quantity sequentially. For the convenience, let's say Firm 1 is a dominant firm and Firm 2 is a follower. The market demand is given by P=110 - 5Q, where Q is the total output (i.e., Q=Q1+Q2). Each firm has an identical cost function, TCi=7Qi, i=1, 2. Each firm maximizes its profit by choosing the quantity. In this Stackelberg equilibrium, Firm 1 will sell __________ units.
Consider a Duopoly model, in which two firms decide a quantity sequentially. For the convenience, let's say Firm 1 is a dominant firm and Firm 2 is a follower. The market demand is given by P=110 - 5Q, where Q is the total output (i.e., Q=Q1+Q2). Each firm has an identical cost function, TCi=7Qi, i=1, 2. Each firm maximizes its profit by choosing the quantity. In this Stackelberg equilibrium, Firm 1 will sell how many units.
A homogenous-good duopoly faces an inverse market demand function of p = 150 − Q. Assume that both firms face the same constant marginal cost, MC1 = MC2 = 30. Calculate the output of each firm, the market output, and the market price in a Nash-Cournot equilibrium Re-solve part (a) assuming that the marginal cost of firm 1 falls to MC1 =20 Explain what will happen to each firm’s output, the market output, and the market price if the two firms can collude (e.g., form a cartel)
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.)
Q1) Which one of the following statements about Cournot oligopoly model with N firms is incorrect? 1)The result with unspecifed N firms can be applied to N=1. 2)If N>1 and there exists a unique Nash equilibrium, then the market price cannot depend on N. 3)If the model is symmetric and there exists a unique Nash equilibrium and N approaches infinity, then the market price approaches to the marginal cost, i.e., the perfectly competitive price. 4)The result with unspecified N firms can be applied to N approaching infinity. Q2) Which of the following statements about the classic Cournot duopoly model is incorrect? 1)The products of the two firms are homogeneous. 2)It is a static game with complete information. 3)The two firms decide on their prices and let their quantities be dictated demand conditions. 4)There exist examples that have unique Nash equilibrium points.