The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is: P = 8 - 0.005Qd where P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output. a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw? b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh? c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a bar of dark chocolate?
The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market
P = 8 - 0.005Qd
where P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.
a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?
b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?
c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a bar of dark chocolate?
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