What is the cournot equilibrium

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Reference no: EM132784279

Suppose that there are two competing firms producing Kvas in Vladivostok. The market demand for Kvas in Vladivostok is given by the inverse demand function p = 200-Q/10, where Q is the total quantity of Kvas being consumed (the quantity is in litters per day and the price is in RUB per litter).

Problem (a) The cost of producing Kvas for each firm is Ci(qi) = 50qi (RUB), write down the profit function πi (qi; Q) of each firm i. What is the Cournot equilibrium in this game?

Problem (b) One of the firms (say Firm 2) improves the production technology, so that its production cost equals to C2(q2) = 40q2. What is the Cournot equilibrium then?

Problem (c) Explain what is the relation between Cournot equilibrium and Nash equilibrium.

Reference no: EM132784279

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