Question
All questions are about the game theory, please give explanations! Thank you! Q1: (Cournot Competition) Consider the following duopoly market Both firms produce a homogenous
All questions are about the game theory, please give explanations! Thank you!
Q1: (Cournot Competition) Consider the following duopoly market Both firms produce a homogenous good. The market demand isQ=100-10P, and each firm has the following total cost function: TC=1/2qi2 In this market, both firms choose the quantity they supply simultaneously and the price is such that it clears the market.
1) What is the best response of firm 1, given that firm 2 produces 76 units of good?
2) What is the total quantity produced Q, given that the market is in Nash Equilibrium?
Q2: In a standard Cournotmodel:
A. Nash Equilibrium in a duopoly generates the same aggregate quantity as a monopoly market with identical aggregate demand and cost functions.
B. Nash Equilibrium in a duopoly market generates a larger aggregate quantitythan a monopolymarket with identical aggregate demand and cost functions.
C. Nash Equilibrium in a duopoly market generates a smaller aggregate quantitythana monopolymarket with identical aggregate demand and cost functions.
D. The aggregate quantity generated by the Nash Equilibrium in a duopoly market is sometimes smaller and sometimes larger thanaggregate quantity ina monopolymarket with identical aggregate demand and cost functions.
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