Explore BrainMass
Share

# Basic Oligopoly Models

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Consider a duopoly with product differentiation in which the demand and cost function are:

Q1 = 88 - 4P1 + 2P2
C1 = 10q1
Q2 = 56 + 2P1 - 4P2
C2 = 8Q2

Derive a price reaction function for each firm on the assumption that each maximizes its profit with respect to its own - price elasticity Determine equilibrium value of price, quantity and profit for each seller.

Also see it in the attached file please.

https://brainmass.com/economics/general-equilibrium/basic-oligopoly-models-159151

#### Solution Preview

Consider a duopoly with product differentiation in which the demand and cost function are:

Q1 = 88 - 4P1 + 2P2
C1 = 10q1
Q2 = 56 + 2P1 - 4P2
C2 = 8Q2

Derive a price reaction function for each firm on the assumption that each maximizes its profit with respect to its own - price elasticity ...

#### Solution Summary

Solution shows a price reaction function for each firm on the assumption that each maximizes its profit with respect to its own - price elasticity Determine equilibrium value of price, quantity and profit for each seller.

\$2.19