Question
Suppose there are n firms in a Cournot oligopoly model. Let q i denote the quantity produced by firm i , and let Q =q
Suppose there are n firms in a Cournot oligopoly model. Let qi denote the quantity produced by firm i, and let Q =q1 + q2 +...+ qn be the aggregate quantity in the market. Let P denote the market clearing price and assume that the inverse market demand is given by P(Q)=a - Q (when Q<a, else P=0). Assume that the total cost for firm i of producing quantity qiis C(qi) = cqi . That is, there are no fixed costs and the marginal cost is constant at c, where we assume c < a. Following Cournot, suppose that the firms choose their quantities simultaneously. What is the Nash equilibrium? What happens as n approaches infinity?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started