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Suppose two firms are engaged in Cournot competition. The firms are identical, produce homogeneous products and have marginal costs = $0 and no fixed cost.
The firms face the following inverse demand curve:
p = 300 - (q1 + q2). The best response functions for the two firms are as follows:
q1 = 150 - 0.5 * q2
q2 = 150 - 0.5 * q1
What is the total quantity produced in equilibrium?
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What questions do you have that would help you understand these points better? Reflecting on what you read this week, offer approaches your classmates may use to resolve the answer to their questions.
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