Consider a Cournot duopoly with inverse demand , where is the market price and is firm 's output. Firm 's cost function is with , and Firm 's cost function is . In Cournot equilibrium, if firm 's market share is , then
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Consider a Cournot duopoly with inverse demand p=1-q₁-q₂, where p is the market price and qᵢ is firm i 's output. Firm 1 's cost function is C₁(q₁)=cq₁ with c∈[0,3/4], and Firm 2 's cost function is C₂(q₂)=q₂/2. In Cournot equilibrium, if firm i 's market share is sᵢ=qᵢ/(q₁+q₂), then (A) s₁=(2-2c)/(3-4c) and s₂=(1-2c)/(3-4c) (B) s₁=2c/(3-2c) and s₂=(3-4c)/(3-2c) (C) s₁=(3-4c)/(3-2c) and s₂=2c/(3-2c) (D) s₁=(1-2c)/(3-4c) and s₂=(2-2c)/(3-4c)
Also written as: Consider a Cournot duopoly with inverse demand p=1-q_1-q_2, where p is the market price and q_i is firm i 's output. Firm 1 's cost function is C_1(q_1)=cq_1 with c in [0,3/4], and Firm 2 's cost function is C_2(q_2)=q_2/2. In Cournot equilibrium, if firm i 's market share is s_i=q_i/(q_1+q_2), then
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.