Three Cournot competitors produce in a market with indirect demand P (Q) = 15- Q The...

Three Cournot competitors produce in a market with indirect demand

P (Q) = 15- Q

The marginal cost for all firms is constant and equals 3.
a). What are the Cournot equilibrium quantities, price, and firm profits?
b) Two of the three firms want to merge. Calculate the new equilibrium quantities, price, and firm profits if
the post-merger market structure is the asymmetric duopoly.
c). Compare the merged firms’ pre- and post-merger profits. Is this merger good for the merging firms? for
consumers? for the outside firm?

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Expert Solution

Rahul Sunny answered 2 months ago

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