question archive In a market that operates under quantity competition there are 2 firms (Cournot duopoly)
In a market that operates under quantity competition there are 2 firms (Cournot duopoly)
Subject:EconomicsPrice: Bought3
In a market that operates under quantity competition there are 2 firms (Cournot duopoly). The inverse demand function is P = 240 - 2 Q. The cost structure of firm 1 is given by C1(q1) = F1 + c1 q1 and that of firm 2 is given by C2(q2) = F2 + c2 q2. Prior to competing, the two firms can engage in research at levels (x1 , x2) respectively in order to lower their marginal costs. As a result, marginal costs are c1 = 40 - x1 - β2 x2 and c2 = 40 - x2 - β1 x1, where β1 = 0.75 and β2 = 0.625. Finally, the research costs are F1 = 3 (x1 )2/2 and F2 = 4 (x2 )2/2.
If, instead, β1 = 0.3 and β2 = 0.4, then the Nash Equilibrium research levels are:
Group of answer choices
=Higher than cooperative research levels for firm 2 but lower for firm 1.
Higher than the cooperative research levels for both firms.
Higher than cooperative research levels for firm 1 but lower for firm 2.
Lower than the cooperative research levels for both firms.
