Find the cournot equilibrium output and price

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Suppose that in a particular market, the inverse demanded for hasenpfeffer is given by P = 100 - Q. The market is served by two Cournot competitors, Hansel and Gretel, whose quantities are denoted q_Hand q_G , respectively. Both competitors can produce hasenpfeffer at a constant marginal and average total cost of $10.

a. Find the Cournot equilibrium output and price.

b. Suppose that demand doubles so that at each price, twice as many servings are demanded as before. Specifically, P = 100 - 0.5Q. What happens to the Cournot price and quantity as a result of the increase in demand?

c. Suppose that the original demand doubles, but in a different way, so that each customer is willing to pay twice as much as before to obtain hasenpfeffer. Specifically, P = 200 - 2Q.
What happens to the Cournot price and quantity as a result of the increase in demand?

d. Would your answers to (b) and (c) remain the same if Hansel and Gretel were Bertrand competitors rather than Cournot competitors?

Reference no: EM131335679

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