Consider a Cournot duopoly in which firm i has marginal cost c; and firm j has...

 

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Consider a Cournot duopoly in which firm i has marginal cost c; and firm j has marginal cost C₁. The firms face inverse demand function K p= Q where K > 0 is a constant and Q = qi+q; is aggregate output. Assume that 3c; > cj > c> 0. (a) Derive the Cournot equilibrium market price p, the equilibrium market shares equilibrium outputs q and q and equilibrium profits and T. Briefly comment on your results. S; and Sj, (b) What do the firms' reaction functions look like? Using a diagram and an equation may be helpful in determining this. Consider a Cournot duopoly in which firm i has marginal cost c; and firm j has marginal cost C₁. The firms face inverse demand function K p= Q where K > 0 is a constant and Q = qi+q; is aggregate output. Assume that 3c; > cj > c> 0. (a) Derive the Cournot equilibrium market price p, the equilibrium market shares equilibrium outputs q and q and equilibrium profits and T. Briefly comment on your results. S; and Sj, (b) What do the firms' reaction functions look like? Using a diagram and an equation may be helpful in determining this.

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