Two firms (Firm A and B) produce homogenous goods and compete in quantities. The industry's (inverse) demand function P = 40 – Q where Q is total industry output, which is equal to q1 + q2. Firm A has production cost described by the cost function CA (qA ) = 20qA , while firm B's cost function is cB (qB ) = cA (qA ). %3D a) Compute the Cournot equilibrium quantities and price. b) Provide a comparison of Cournot with Stackelberg duopolies for each firm's output and prices. c) What are the Bertrand-Nash equilibrium prices in a market for a homogenous good?
Two firms (Firm A and B) produce homogenous goods and compete in quantities. The industry's (inverse) demand function P = 40 – Q where Q is total industry output, which is equal to q1 + q2. Firm A has production cost described by the cost function CA (qA ) = 20qA , while firm B's cost function is cB (qB ) = cA (qA ). %3D a) Compute the Cournot equilibrium quantities and price. b) Provide a comparison of Cournot with Stackelberg duopolies for each firm's output and prices. c) What are the Bertrand-Nash equilibrium prices in a market for a homogenous good?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.4P
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