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Two identical firms face linear demand. Market demand is given by P=30-Q. Suppose both firms face zero marginal costs. 1. Solve for Cournot equilibrium prices

Two identical firms face linear demand. Market demand is given by P=30-Q. Suppose both firms face zero marginal costs.

1. Solve for Cournot equilibrium prices and outputs.

2. Solve for Stakelberg equilibrium prices and outputs.

3. Compare graphically consumer and producer surplus in Cournot and Stakelberg equilibria to perfect competition.n

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1 Solve for Cournot equilibrium prices and outputs The Cournot equilibrium is a model of imperfect competition in which firms compete in quantity rather than price In a Cournot equilibrium each firm t... blur-text-image

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