In: Economics
Three firms produce ethanol and compete in a Cournot oligopoly. Each firm has the same cost function, ??(?) = 1/ 2 ?. Market demand is given by ? = 600 − ?. The quantities produced by the three firms are respectively ?1,?2,?3.
(a) What is firm 1’s optimal quantity as a function of ?2 and ?3?
(b) What is the total quantity produced by all three firms?