Analysts have estimated the inverse market demand in a homogeneous-product Cournot duopoly to be P = 180 −3 (Q1 + Q2). They estimate costs to be C1(Q1) = 21Q1 and C2(Q2) = 33Q2.
a. Determine the reaction function for each firm.
Firm 1: Q1 = − Q2
Firm 2: Q2 = − Q1
b. Calculate each firm’s equilibrium output.
Firm 1:
Firm 2:
c. Calculate the equilibrium market price. $
d. Calculate the profit each firm earns in equilibrium.
Firm 1: $
Firm 2: $
