A homogenous-good duopoly faces an inverse market demand function of p = 150 − Q.Assume that both firms face the same constant marginal cost, MC1 = MC2 = 30. Calculate the output of each firm, the market output, and the market price in a Nash-Cournot equilibriumRe-solve part (a) assuming that the marginal cost of firm 1 falls to MC1 =20Explain what will happen to each firm’s output, the market output, and the market price if the two firms can collude (e.g., form a cartel)

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Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

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A homogenous-good duopoly faces an inverse market demand function of p = 150 − Q.

Assume that both firms face the same constant marginal cost, MC¹ = MC² = 30. Calculate the output of each firm, the market output, and the market price in a Nash-Cournot equilibrium
Re-solve part (a) assuming that the marginal cost of firm 1 falls to MC¹ =20
Explain what will happen to each firm’s output, the market output, and the market price if the two firms can collude (e.g., form a cartel)

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