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Assume oligopoly with two companies 1 and 2 (duopoly) and a Cournot model where the market demand curve is given by P = 120 -Q
Assume oligopoly with two companies 1 and 2 (duopoly) and a Cournot model where the market demand curve is given by P = 120 -Q where P is the price and Q is total production for both companies (i.e. Q = Q1 + Q2). Company 1 has marginal cost equal to MC1 = 20 while company 2 has marginal cost equal to MC2 = 40.a) Find the reaction functions of both companies.b) Find both companies' production, price and profit in a Nash-Cournot equilibrium.
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