In a Cournot game with homogeneous commodities
Question # 00615233
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Updated on: 11/09/2017 05:03 AM Due on: 11/09/2017
In a Cournot game with homogeneous commodities, players are ?rms who simultaneously announce quantities they want to produce. Suppose there are two ?rms, 1 and 2, whose chosen quantities are q1 and q2 respectively. The market price is given by P = 31 ? 3Q where Q = q1 + q2. The constant marginal cost of each ?rm is 4.
a) (12 points) What is the best response function for each ?rm?
b) (6 points) What is the best response quantity for each ?rm to produce?
c) (6 points) What is the market price?
d) (6 points) What is the pro?t for each ?rm?
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Solution: In a Cournot game with homogeneous commodities