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Find the cournot-nash equilibrium

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Reference no: EM133063658

Consider a no differentiated product market with inverse demand function P Q q = 62 - 2. Assume that all firms face the total cost function C=2qi , where denotes the firm's production. Answer the following questions.

a) Suppose that the market is served by a monopolist who can only charge uniform liner prices according to the standard monopoly model. Find the monopoly equilibrium (price, quantity, profit & Lerner Index). N.B. a monopolist may maximise profit at price higher than marginal cost.

b) Suppose now that the two firms compete in quantities according to the Cournot model. Find the Cournot-Nash equilibrium (quantities, price, profits & Lerner Index).

c) Assume an oligopolistic market with two identical firms which compete in prices according to the Bertrand model. Find the Bertrand-Nash equilibrium (prices, quantities, profits & Lerner Index).

d) Compare Monopoly, Bertrand and Cournot equilibria in terms of market power & industry profits. Comment on your results focusing on: i) the relationship between industry concentration and firms' market power; ii) the effect of different modes of competition on industry profit, and consumer's social welfare.

Reference no: EM133063658

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