Question
There are two firms, Firm A and Firm B that are competing in quantities (Cournot competition). The (inverse) demand in the market they operate is
There are two firms, Firm A and Firm B that are competing in quantities (Cournot competition). The (inverse) demand in the market they operate is given by p = 10 qA qB, p being the price in the market and qA, qB are the quantities produced by each firm. The total cost of Firm A is TCA(qA) = cqA with c a positive constant and the one of Firm B is TCB(qB) = qB2 . (a) Find the Cournot equilibrium quantities as well as the price. How does price change with c? For what values of c does one of the equilibrium quantities become zero? (b) Find C1, C2 and the HHI of this market. Explain how C1 changes as c increases
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