Solve for the market price at the cournot-nash equilibrium

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Reference no: EM13834810

In the market:

P=150-Q,

where Q=q1+q2.

The firms cost functions are given by the following functional form: C(qi)=ciqi, where i=1,2. Under this functional form, the firms marginal cost equals its average cost. This functional form is chosen for its mathematical convenience, it is not an assumption of the model. The same can be said about the use of the linear demand function.

2) Assume that c1=c2=$30.

a) Derive firm ones and firm twos best-response functions.

b) Illustrate and solve for the output levels that constitute the Nash equilibrium.

c) Discuss and explain whether the three output levels discussed in questions 1a- 1c are part of the Nash equilibrium.

d) Solve for the market price at the Cournot-Nash equilibrium. Solve for firm-one and firm-two profits at the Cournot-Nash equilibrium.

Reference no: EM13834810

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