There are two firms 1 and 2 in an industry, each producing output Q1 and Q2 respectively and facing the industry demand given by P=50-2Q, where P is the market price and Q represents the total industry output, that is Q= Q1 + Q2. Assume that the cost function is C = 10 + 2q. Solve for the Cournot equilibrium in such an industry.
Introduction In an oligopolistic market structure, a few firms dominate and make decisions strategically, keeping in mind the reactions of their competitors. The Cournot model is a foundational model of duopoly (two-firm competition) where firms choose output levels simultaneously to maximize their profits, assuming the other firm’s output is fixed. This question involves solving for […]