Two fi?rms compete in a duopoly market. each fi?rm chooses, Ask an Expert

Economics

Two fi?rms compete in a duopoly market. Each fi?rm chooses a quantity and the price in the market is determined from the following inverse demand function

P = 240 -0.5Q where Q = q1 + q2. Each ?firm has constant marginal costs with c1 = c2 = $60.

(a) If fi?rms choose output simultaneously, ?find the Best Response Function for fi?rm 2.

(b) If the fi?rms choose output sequentially, with Firm 1 setting output before Firm 2 (Firm 2 is able to observe the choice of Firm 1 before making its own choice),describe a strategy for Firm 1 and describe a strategy for Firm 2.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9283906

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