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Consider two identical firms (A and B) that face the following linear market demand curve and marginal cost:
P = 1200 – Q, where Q = Q1 + Q2 and MC = 0.
Derive firms A and B output-reaction curves.
Calculate the Cournot equilibrium quantity per firm and price in this market.
B. Questions/Short Answers
1. What is the distinguishing characteristic of oligopoly in relation to other forms of market organizations?
2. What are the advantages of the HHI over concentration ratios in measuring the degree of concentration in an industry?
3. What is the Bertrand model? What is its relationship to the Cournot model?
4. What is the Stackelberg model?
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