Cournot equilibriumthe dancing machine industry is a, Ask an Expert

Economics

Cournot Equilibrium

The dancing machine industry is a duopoly. The two firms, Chuckie B corp and Gene Gene Dancing Machines, compete through Cournot quantity-setting competition. The demand curve for the industry is P = 120-Q, where Q is the total quantity produced by Chuckie B and Gene. Currently, each firm has marginal cost of $60 and not fixed cost.

First question is what is the equilibrium price, quantity, and profit for each firm? I got price:$80, Quantity (each):20, and Profit:$400.00

Part B is where I am struggling

Chuckie B corp. is considering implementing a proprietary technology with a one-time sunk cost of $200. Once this investment is made, marginal cost will be reduced to $40. Gene Gene has no access to this or any other cost saving technology, and its marginal cost will remain at $60. Should CHuckie B invest in the new technology? (Hint: you must compute cournot equilibrium)

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91530020

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