2. Consider the following Cournot game. Suppose there are two sellers in a market, A and...

 

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2. Consider the following Cournot game. Suppose there are two sellers in a market, A and B. A and B compete in a duopoly market with a demand curve given by P=100-Q₁-Q. Both have cost functions C(Q)=2Q and C(Q)=2Q. A and B make simultaneous quantity choices. a. Write down A's profit function. b. Find A's reaction function. c. Find B's reaction function (Hint: you can use symmetry to get the answer directly from the answer you found in part b). d. Find the equilibrium quantity chosen by A and B. e. Calculate the profits earned by A and B. 2. Consider the following Cournot game. Suppose there are two sellers in a market, A and B. A and B compete in a duopoly market with a demand curve given by P=100-Q₁-Q. Both have cost functions C(Q)=2Q and C(Q)=2Q. A and B make simultaneous quantity choices. a. Write down A's profit function. b. Find A's reaction function. c. Find B's reaction function (Hint: you can use symmetry to get the answer directly from the answer you found in part b). d. Find the equilibrium quantity chosen by A and B. e. Calculate the profits earned by A and B.

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Solution DUOPOLY MARKET Given that There are two sellers in the market Market A and Market B Demand Curve P 100 Q A Q B Cost of market A CQ A 2Q A Cos... View the full answer