A set of ﬁrms N = {1,...,n} select quantities of the same good to sell. Each...

A set of ﬁrms N = {1,...,n} select quantities of the same good to sell. Each ﬁrm i selects qi, and P(q1,...,qi,...,qn) = 1,000−(q1 +···+ qn). Assume they will choose q1 +···+ qn < 1,000. Each ﬁrm has the same linear cost for producing the goods, so C(qi) = cqi.

(a) Write down each ﬁrm’s set of strategies, and proﬁt function.

(b) Write the FOC’s for each ﬁrm.

(d) Solve for the market price, and each ﬁrm’s proﬁt. What happens when n is large?

(e) Do you think this is reasonable/observed?

(f) What elements do you think are missing from the model? Write as many as you can.

(g) What are some diﬀerence between Bertrand and Cournot competition? Why are the results diﬀerent?

Solutions

Expert Solution

Dear student if you have any doubt Please ask, Thank you.

Colby Messinger answered 2 months ago

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