Question
Consider the following Cournot game. Suppose there are two providers of parcel delivery, Han and Lando. Han and Lando compete in a duopoly market with
Consider the following Cournot game. Suppose there are two providers of parcel delivery, Han and Lando. Han and Lando compete in a duopoly market with a demand curve given by P=150 - QH - QL. Both have identical costs, C(QH)=50+3QH and C(QL)=50+3QL. They choose quantities simultaneously.
a. Write down Han's profit function.
b. Find Han's reaction function.
c. Write down Lando's profit function and reaction function. (Hint: you can use symmetry to get the answer directly from the answers you found in parts a and b)
d. Find the equilibrium quantity chosen by Han and Lando. (5 points) e. Calculate the profits earned by Han and Lando.
f. Calculate the consumer surplus in the market at the Cournot equilibrium price and (total) quantity QH+ QL. (4
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