# duopoly decisions of production

Duopoly decisions to produce

In the duopoly, two rail transport firms compete by choosing a quantity of production simultaneously . The inverse market demand function of rail transport is expressed by p = 18 - q, where q = q1 + q2 . The production costs of the both firms are identical, for the Firm 1 costs are c1 = 0.5q12 and for the Firm 2 costs are c2 = 0.5q22 .

Produce the reaction curve mathematically, i.e. the quantity of production Firm 1 will produce in the Nash equilibrium with the given market demand and costs and taking into account the behavior of the Firm 2.

Finally, interpret the results.

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#### Solution Preview

Duopoly decisions to produce

In the duopoly two rail transport firms compete by choosing simultaneously a quantity of production. The inverse market demand function of rail transport is expressed by p = 18 - q, where q = q1 + q2 . The production costs of the both firms are identical, for the Firm 1 costs are c1 = 0.5q12 and for the Firm 2 costs are c2 = 0.5q22 .

Produce ...

#### Solution Summary

This solution helps produce the reaction curve mathematically.