Question: Consider an industry with four competitors who simultaneously set output levels (Cournot model). Market demand is given by Q = 50 p. Firms 1 and

Consider an industry with four competitors who simultaneously set output levels (Cournot model). Market demand is given by Q = 50 p. Firms 1 and 2 have a cost function given by C = 120 + 301;. Firms 3 and 4 have a cost function given by C = 80 + 50:}. (1) Determine the equilibrium market shares of each rm. Determine the value of the concentration index H. (2) Suppose that rms 1 and 4 merge, forming Firm 1&4; and that the marginal cost of the newly formed rm is equal to c1\" = c1 = 30. Determine the new equilibrium market shares of each rm. Determine the new value of the concentration index H. (3) Compare this value of H with what you would get by simply considering the initial market shares. Justify the difference in value

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