Question
A Cournot duopoly with homogeneous products has an inverse demand curve P = 6 - 3(QA + QB) and costs are CA(QA) = 2QA and
A Cournot duopoly with homogeneous products has an inverse demand curve P = 6 - 3(QA + QB) and costs are CA(QA) = 2QA and CB(QB) = 1.5QB.
a. Define the characteristics that make up a Cournot duopoly.
b. Determine the reaction function for each firm.
c. Calculate each firm's equilibrium output and the market's equilibrium price.
d. If the market elasticity of demand is -1.33 and there are 3 firms in the industry rather than 2, what price is best for firm A to charge? Firm B?
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Managerial Economics
Authors: Paul Keat, Philip K Young, Steve Erfle
7th edition
0133020266, 978-0133020267
