Consider two firms who compete with each other in terms of quantity. If the inverse market demand and total costs of the firms are given by P = 140 – Q TC = 20q, + 10 TC2 = 20q1 + 10 a. Find the Response (Reaction) functions of each curve b. Find the Nash Equilibrium of this Cournot duopoly game c. Graphically represent this equilibrium using their Response (Reaction) curves d. Suppose these two firms collude and form a cartel, what will the equilibrium be under this situation Is the equilibrium under (d) sustainable or not and why? f. Suppose that both firms have agreed that firm 1 is a leader and firm 2 is a follower, find the Nash equilibrium of this sequential game e.

Consider two firms who compete with each other in terms of quantity. If the inverse market demand and total costs of the firms are given by P = 140 – Q TC = 20q, + 10 TC2 = 20q1 + 10 a. Find the Response (Reaction) functions of each curve b. Find the Nash Equilibrium of this Cournot duopoly game c. Graphically represent this equilibrium using their Response (Reaction) curves d. Suppose these two firms collude and form a cartel, what will the equilibrium be under this situation Is the equilibrium under (d) sustainable or not and why? f. Suppose that both firms have agreed that firm 1 is a leader and firm 2 is a follower, find the Nash equilibrium of this sequential game e.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 14P

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