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Oligopolistic competition with homogeneous goods

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Oligopolistic Competition with Homogeneous Goods

Two firms produce all cars: Ford and GM. The demand function of cars is D(p)=7-p, where p are the prices. The two firms have a marginal cost of 2, and a fix cost of 0.

Firms compete in prices.

a. Calculate the reaction functions. Draw them in a single graph.

b. Calculate the Nash equilibrium quantities and the profits of each firm

c. Which marginal cost value would push GM out of the market?

Reference no: EM132603653

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