For the Cournot duopoly with , and : suppose, prior to the choice of quantities, Firm can choose by investing . Assuming the firm chooses anticipating Cournot quantity competition thereafter, the optimal choice of is
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For the Cournot duopoly with p=1-q₁-q₂, C₁(q₁)=cq₁ and C₂(q₂)=q₂/2: suppose, prior to the choice of quantities, Firm 1 can choose c by investing (9c²-13c)/18. Assuming the firm chooses c anticipating Cournot quantity competition thereafter, the optimal choice of c is (A) 1/2 (B) 2/3 (C) 3/4 (D) 0
Also written as: For the Cournot duopoly with p=1-q_1-q_2, C_1(q_1)=cq_1 and C_2(q_2)=q_2/2: suppose, prior to the choice of quantities, Firm 1 can choose c by investing (9c^2-13c)/18. Assuming the firm chooses c anticipating Cournot quantity competition thereafter, the optimal choice of c is
Monopolistic competition and oligopoly has come up 104 times in 7 exams since 2004.
This question is on Cournot competition, part of Monopolistic competition and oligopoly in Microeconomics.
Firms choosing quantities simultaneously, reaction curves, and equilibrium as the number of firms or costs change.
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Question from the DSE 2004 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.