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Assume that Smith Inc. and Wang, Inc. compete in an oligopolistic setting.
They produce a homogeneous product and face the following industry demand curve:

P = 20 - .01Q
Where Q = Q1 + Q2

a. Each firm faces a marginal cost of $10. Find the equilibrium quantity produced by each firm in the Cournot equilibrium. What is the equilibrium price and profits for each firm?

b. What are the equilibrium price, combined output, and profits with Bertrand competition?

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Solution Summary

Word file contains calculations of the equilibrium quantity produced by each firm, equilibrium price, combined output, and profits.

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