Two firms compete in the style of Cournot. Both firms have a constant marginal cost. No capacity constraints for either firm. The market demand is linear Q(p) = a - bp. Which of the below can be observed in a Nash equilibrium? O "Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.6; firm 2's Lerner index: 0.4." O "Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.2; firm 2's Lerner index: 0.3." O "Firm 1's market share: 30%; firm 2's market share: 70% firm 1's Lerner index: 0.5; firm 2's Lerner index: 0.5." O "Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.5; firm 2's Lerner index: 0.5." Depending on the cost and demand functions any of the above can be observed in a Nash equilibrium.
Two firms compete in the style of Cournot. Both firms have a constant marginal cost. No capacity constraints for either firm. The market demand is linear Q(p) = a - bp. Which of the below can be observed in a Nash equilibrium? O "Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.6; firm 2's Lerner index: 0.4." O "Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.2; firm 2's Lerner index: 0.3." O "Firm 1's market share: 30%; firm 2's market share: 70% firm 1's Lerner index: 0.5; firm 2's Lerner index: 0.5." O "Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.5; firm 2's Lerner index: 0.5." Depending on the cost and demand functions any of the above can be observed in a Nash equilibrium.
Chapter15: Oligopoly And Strategic Behavior
Section: Chapter Questions
Problem 14P
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Transcribed Image Text:Two firms compete in the style of Cournot. Both firms have a constant marginal cost. No capacity constraints for either firm. The market demand is linear Q(p) =
bp. Which of the below can be observed in a Nash equilibrium?
a -
"Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.6; firm 2's Lerner index: 0.4."
"Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.2; firm 2's Lerner index: 0.3."
"Firm 1's market share: 30%; firm 2's market share: 70% firm 1's Lerner index: 0.5; firm 2's Lerner index: 0.5."
"Firm 1's market share: 40%; firm 2's market share: 60% firm 1's Lerner index: 0.5; firm 2's Lerner index: 0.5."
Depending on the cost and demand functions any of the above can be observed in a Nash equilibrium.
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