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Cournot Game with Increasing Marginal Costs: Consider the Cournot model of competition in which firms set quantities and the price is set by the market.
Cournot Game with Increasing Marginal Costs: Consider the Cournot model of competition in which firms set quantities and the price is set by the market. The price in the market is p = 10 - 91 - 92, but unlike in class the cost functions for firms 1 and 2 are c(q1) = 91 and c(q2) = 92. (a) Solve for the Nash Equilibrium quantities produced by each firm. (b) Suppose the firms can collude and agree to each produce q1 = 92 = q. What quantity would they set? (c) How does the collusive quantity compare to the Cournot Nash Equilibrium quan- tity? Why? (d) How does the total quantity under collusion compare to the quantity a monopolist would set? Why
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