This is a Cournot duopoly game. The players in this game are two companies trying to...
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This is a Cournot duopoly game. The players in this game are two companies trying to maximize their profit facing an inverse demand function that depends on total quantity produced by the two firms. Be careful, firms in this problem choose what quantity to produce (assume they cannot produce negative quantities) and the price is determined by the inverse demand. Each player has constant marginal cost of 10$. This means that the total cost function of firm i is C(q) = 10q₁. The inverse demand function mentioned above is p = 1000-q, where q =q₁+q₂. To get full credit you should: define the set of players, the set of actions, the payoffs for each firm, the optimization problem, solve for the Nash equilibrium (Spoilers: there is only one NE) and add a graph of the best response functions for both players indicate the equilibrium and which line is for which player. This is a Cournot duopoly game. The players in this game are two companies trying to maximize their profit facing an inverse demand function that depends on total quantity produced by the two firms. Be careful, firms in this problem choose what quantity to produce (assume they cannot produce negative quantities) and the price is determined by the inverse demand. Each player has constant marginal cost of 10$. This means that the total cost function of firm i is C(q) = 10q₁. The inverse demand function mentioned above is p = 1000-q, where q =q₁+q₂. To get full credit you should: define the set of players, the set of actions, the payoffs for each firm, the optimization problem, solve for the Nash equilibrium (Spoilers: there is only one NE) and add a graph of the best response functions for both players indicate the equilibrium and which line is for which player.
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