Two firms have the same production technology, represented by the cost function: T Cite ) = ^
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Two firms have the same production technology, represented by the cost function:
T Cite ) = ^ + <*>2
«·>» , «_i, S
[0 if ft = 0 3 5 There is also an alternative way of interpreting Black-Litterman model in terms of robust
"shrinkage" estimators; see, e.g., Chapter 9 of Ref. [8].
The cost function involves a fixed cost F and a squared term implying a diseconomy of scale; a firm will produce only when its profit is positive. The two firms compete on quantity, and price is related to total quantity Q = <7i + 92 by the linear function P(Q) = 100 — Q. Find the maximum F such that both firms engage in production, assuming a Cournot competition.
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Related Book For
Quantitative Methods An Introduction For Business Management
ISBN: 1579
1st Edition
Authors: Paolo Brandimarte
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