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Consider the Cournot duopoly with the inverse market demand P(Q) = 100 Q. Each firm i=1,2 has the total cost function C_i(q_i) = 10q_i. Also,

Consider the Cournot duopoly with the inverse market demand P(Q) = 100 Q. Each firm i=1,2 has the total cost function C_i(q_i) = 10q_i. Also, firm 2 has the capacity constant at 20 units, that is, q_1 20. (a) Find the best response function of each firm q_i = BR_i(q_ j), i = 1,2, ji. (Note: depending on qj, the formula for the best response function can be different). (b) Find the equilibrium quantities q_iC of both firms and the market price p C .

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