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(4 points) (Cournot or Quantity Competition) Assuming both firms maximize over price their
inverse demand curves will be: pi=2ba3b4qi3b2qj
Solution
is: i. (1 point) Set up the objective function of a representative firm. ii. (2 points) Find the firm's
best response. iii. (1 point) Find the Nash equilibrium-you may assume symmetry. Also find the
equilibrium profits of both firms.
2. In a given market their are two firms each of which has the same demand curves, for i{a,b}
and j=i it is: qi=abpi+2bpj they also have the same cost function: ci(q)=cqi.

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(4 points) (Cournot or Quantity Competition) Assuming both firms .pdf

  • 1. (4 points) (Cournot or Quantity Competition) Assuming both firms maximize over price their inverse demand curves will be: pi=2ba3b4qi3b2qj Solution is: i. (1 point) Set up the objective function of a representative firm. ii. (2 points) Find the firm's best response. iii. (1 point) Find the Nash equilibrium-you may assume symmetry. Also find the equilibrium profits of both firms. 2. In a given market their are two firms each of which has the same demand curves, for i{a,b} and j=i it is: qi=abpi+2bpj they also have the same cost function: ci(q)=cqi.