Gruber and Shyft are ridesharing companies that have a duopoly in Teslandia. They compete over quantity, which is the number of rides per day. The daily demand for rides in Teslandia is given by Q = 80,000 – 1000p, where p is the price per ride. The marginal cost per ride is the same for both companies at $20.
(1) What is the Cournot equilibrium quantity for Gruber?
(2) What is the Cournot equilibrium price?
(3) Assume the firms offer a homogenous product (ride), and suppose instead of competing over quantity they compete over price. What is the Bertrand equilibrium price?
(4) If they could form a cartel and split the profits, what price would they charge?
