Question: Consider a Cournot duopoly with a linear demand & cost functions. Assume that q1and q2are quantities of homogenous items produced by two firms (1 &2).

Consider a Cournot duopoly with a linear demand & cost functions. Assume that q1and q2are quantities of homogenous items produced by two firms (1 &2). Let P= 100-2(q1+q2) and firms cost functionsare given byC1= 2+ 10q1andC2= 4+ 10q2.Answer the following questions;

a)Calculate the Cournot equilibrium output, price and profit for each firm. [ 10]

b) Assume a Stackelberg scenario where firm 1 is a price setter. Show that Profit for firm 1 is greater than the Cournot scenario and that profit for firm 2 is lower than for firm 2 under Cournot scenario in (a) above.[10]

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Analytics Exercise 21-1 (Algo) Recently, Phil Harris, the production control manager at Brunswick, read an article on time-phased requirements planning. He was curious about how this technique might...

Consider a Cournot duopoly with a linear demand & cost functions. Assume that q1 and q2 are quantities of homogenous items produced by two firms (1 &2). Let P= 140-2(q1+q2) and firms cost...

Question 1 [15 points] Consider a Cournot duopoly with two firms 1 and 2. Let qi and q2 be quantity produced by firms 1,2 and let the inverse demand given by p = 12 - q1- q2 where p = price of the...

Question 1 Consider an individual with the quasi-linear utility function, U = In(x) + y. Assume an interior solution to her utility maximization problem and answer the following questions: (i) Derive...

Consider a Cournot duopoly with two firms 1,2. Let q1, q2 be the quantities produced by firms 1,2. The price p is given by the inverse demand p = 24 Q where Q = q1 + q2. The unit cost of firm 1 is c1...

Exercise 1: Stackelberg in quantities Suppose we have two firms, a leader and a follower. The leader's cost function is given by CL(qL) = 10 + qL and the follower's cost function is C (q,) = 5q, + 5....

Exercise n. 3 Consider a duopoly facing a linear demand P(Q) - A-9, -92 . Each firm produces at the same constant marginal cost, c. Firm /, the leader, chooses its output level first. Firm 2, the...

1. ( 20 points) Consider the following normal-form simultaneous-move game. (1) When X>1, find the pure-strategy Nash equilibrium. (2) When X>0, find the range of X in which the pure-strategy Nash...

Please help with parts A-D of the attached practice question, thank you! Consider a Cournot duopoly game, where the two firms have the same costs of production. Firm 1 selects quantity q1 and pays...

Can you help me with this question please 10. Consider the Cournot duopoly game with incomplete information. First, nature chooses a number x, which is equally likely to be 8 or 4. This number...

Suppose that a task in a project has the following time estimates: to= optimistic completion time = 6 weeks tm= most likely completion time = 8 weeks tp= pessimistic completion time = 11 weeks...

1. Identify possible actors and use cases involved in ATAs bus operations. 2. Create a use case diagram for the bus system. 3. Create a sequence diagram for the use case you selected. 4. Create a...

On April 1 , 2 0 2 6 , General Corporation signs a 5 - year lease to use office space. The present value of the monthly lease payments is $ 1 0 9 , 0 0 0 . How will the financial statements be...

Mrs. Nyambura retired at the age of 66 years, and Mr. Nyambura retired at the age of 63 years. Mr. Mugo retired at the age of 70 years. all these individuals were members of the pension scheme. All...

LO3.7 (Appendix) Illustrate how supply and demand analysis can provide insights on actualeconomy situations.

13. last word What explains why millions of economic resources tend to get arranged logically and productively rather than haphazardly and unproductively?

LO3.2 Describe demand and explain how it can change.