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In which case firms enjoy a larger profit margin

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Reference no: EM132177174

Consider a duopoly in which both firms produce exactly the same product. Suppose that firms total cost function is given as follows.

TC1(Q1) = 10Q1

TC2(Q2) = 10Q2

The market demand is given by P = 20 - 1/2Q.

A. In a price competition game, what price should be optimally set by each firm? How much will be sold by each firm?

B. In a quantity competition game, what quantity should be set by each firm? what will be the market price?

C. If both firms decide to collude, how much should each firm optimally produce ? What will be the market price?

D. In which case firms enjoy a larger profit margin? Explain.

Reference no: EM132177174

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