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Duopoly I: The Cournot Model

Duopoly I: The Cournot Model. Class 6 Ref: Static Games and Cournot Competition. (Sections 9.4, 9.5.) Chapter 9. Industrial Organization – Contemporary Theory & Practice. Third Edition. Pepall – Richards – Norman. Thomson Ed. pp. 208–226 Industrial Economics Flavio Pinto. Contents.

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Duopoly I: The Cournot Model

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  1. Duopoly I:The Cournot Model Class 6 Ref: Static Games and Cournot Competition. (Sections 9.4, 9.5.) Chapter 9. Industrial Organization – Contemporary Theory & Practice. Third Edition. Pepall – Richards – Norman. Thomson Ed. pp. 208–226 Industrial Economics Flavio Pinto

  2. Contents Contents • The Two Sellers Game • N-Sellers Game • Cournot with Different Costs

  3. The Cournot Model Introduction • Competition between two sellers • No Cooperation • Profit Maximization • Nash Equilibrium • Examples: • Implications for Social Welfare

  4. $ Q Total and Individual Demand The Cournot Model

  5. q1 q2 Best Response Reaction Curves - Functions

  6. Practice Problem Cournot Practice Problem 9.2 p. 215 Assume that two identical firms are serving a market in which the inverse demand function is given by P = 100 – 2Q The marginal costs for each firm are $10 per unit. Calculate the Cournot equilibrium outputs for each firm, the product price and the profits of each firm

  7. Cournot Many Firms Cournot Model for Many Firms

  8. Cournot Model for Many Firms… Cournot Many Firms

  9. Cournot Model for Different Costs Cournot

  10. Reaction Curves q1 q2 Best Response with Different Prices

  11. Oligopolistic Competition and Social Welfare $ $ $ Q Q Q Social Welfare Monopoly Duopoly-Cournot Competitive Market

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