Wednesday, January 23, 2013

Cournot Equilibrium

Alzheimer's problem of the day.

Two firms face the same demand curve, P = 120 -Q*, but have different cost functions.  Firm 1 TC(y) = 30y.  Firm 2 TC (y) = y^2.   Find the equilibrium, Price, and quantity each firm makes.

Rival 1, makes 34.28.  Rival 2, makes 21.4.  P = $64.32.

I loved this problem found on the internet.

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