Re: Cournot Oligopoly Questions!!!!

Posted by Sumit on May 28, 2013; 7:32pm
URL: http://discussion-forum.276.s1.nabble.com/Cournot-Oligopoly-Questions-tp7581233p7581412.html

Q1 by Madhur1987.
a)Joint profit Max level of output(q)=5.2 where q1=2.8 & q2=2.4.

N I didn't get its last part where question is asking for how would your ans change if the firms have not yet entered the industry?..Possible argument 1)If there is only two firm in a industry n both of them not entered yet which only means no one is producing... or 2) either it has to be one of the firm has not entered the industry...

B)I think firm1 willing to pay a atleast of profit that firm2 is earning in case where two firms are competing to each other...n it's coming out to be 18.8.

n Plz someone help me in this I was wondering how much firm1 will produce in each plant after acquiring firm2.....n what will be profit of the firm in this case...


Q2 by Madhur1987
Ans. Equilibrium output=600.
Equilibrium price=53.
Also 100 firms will enter in the industry.

Note: I'm sure of my answer for Q2. but it takes me hell lot of time to get on this answer the reason for this
I first differentiate Cost function of the single firm n then putting MC=p by doing this I get the firm supply curve n then multiplied it by N(where N= number of firm which will enter in industry) to get the industry supply curve then I equated Industry supply =Industry demand curve(given in the question)....n in the end putting different value of N to get the equilibrium price level n then putting the price in industry demand function to get industry total demand...I keep trying this untill I get the value on N where the total profit earn by industry is equal to zero...n the values which I get are givien above you can also verify total profit of the industry is zero at N=100....If anyone of you found any simple way then this hit n try method plz do share.....