Question
Assume that there are four firms supplying homogeneous product and having identical cost functions C(Q)=40. Assume demand curve for the industry is given by P=100-Q
Suppose that each firm expects the others to behave as cournot competitors. What is the
a) Equilibrium industry output? Is it a Nash Equilibrium?
b)what is market price
c) What are the profit for each firm?
Suppose that each firm expects the others to behave as cournot competitors. What is the
a) Equilibrium industry output? Is it a Nash Equilibrium?
b)what is market price
c) What are the profit for each firm?
Answers
Bot
a) The equilibrium industry output is Q = 60. This is a Nash Equilibrium because each firm is maximizing its own profit given the expected behavior of the other firms.
b) The market price is P = 40.
c) The profit for each firm is π = 800.
b) The market price is P = 40.
c) The profit for each firm is π = 800.