1. The demand function in this market is given by

P = 60 - Units produced by your firm - (.5)*(sum of all competitors' units)

and marginal cost of production for each unit is 25. If we solve this Cournot model, we find that in a Nash equilibrium, each firm produces

=(60)2(21),

where MC denotes the marginal cost and N the total number of firms in the market. Calculate the Nash equilibrium quantity for your market.

2. How does the theoretical Nash equilibrium prediction compare to what happened in your experiment?

You are one of 4 players. Each of you will represent a firm. All firms manufacture the same product.

All of you decide simultaneously and independently how many units to manufacture. Your choices can be any number from 0 to 24. Everything produced has a marginal cost of 25. All produced units will be sold, but the more is produced, the lower the unit selling price will be.

The unit selling price is:

Unit selling price = 60 - Units produced by your firm - (.5)*(sum of all competitors' units)

Your profit, measured in points, is therefore:

Your profit = (Unit selling price - 25) Units produced by your firm