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Company A is the only supplier of glass in Big Apple City used for tall buildings exteriors. Its marginal cost of production is cA=1, and
Company A is the only supplier of glass in Big Apple City used for tall buildings exteriors. Its marginal cost of production is cA=1, and it has no other production costs. The demand for such glass in Big Apple city is QD=2-P. Company B in Jersey City produces the same glass and is considering whether to expand to Big Apple city. If it enters, it needs to get a permit to allow it to be a supplier in the Big-Apple city at a cost of L=0.5, which does not vary with quantity of output, and its marginal cost of production is cB=0.5. If it expands to the Big-Apple city, companies A and B both supply to the market, and the market price P satisfies QA+QB=2-P, where QA is company As production level and QB is company Bs
If company B expands to the Big-Apple city, what is the resulting price in a Nash equilibrium?
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