Question

ok so i must have not payed attention in class when we talked about asymmetric costs in cournot duopoly's, so i am stuck on a homework problem. The problem reads as follows (*Note that my notation of c simply means Marginal Cost):

Consider a Cournot duopoly where inverse demand is P(Q) = a - Q but firms, 1 and 2, have asymmetric marginal costs, c1 and c2. What is the Nash equilibrium if 0 <ci < a/2 for each firm? What if c1 < c2 < a but 2c2 > a + c1?

Basically, I can get it down to each firm's individual reaction function's, but I am always used to assuming that the firms are identical (thus having the same marginal costs). I just wanted to maybe know the algebra behind this or simply the intution. If anyone could help that would be cool.

Answer 1

It has been 25 years since I needed to look at Cournot models. But, I remember that things got complicated in the case where the firms had different cost structures.

The intuition behind the Cournot model can be found in a Nash Equilibrium.

Sorry I cant be more helpful.