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Two firms are participating in a Cournot duopoly. The demand function in the market is given...

Two firms are participating in a Cournot duopoly. The demand function in the market is given by Q=430−2P. Each firm’s total cost is given by C(q)=5q+q2.

(1) Write down the inverse demand function and the maximization problem for Firm 1 given that Firm 2 is expected to produce q2^e.

(2) Write down the reaction function q1(q2^e) for Firm 1.
(3) Find the market price, quantities supplied, and firms’ profits in the Cournot

equilibrium of this game.

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Expert Solution


Rahul Sunny answered 2 years ago
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