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    Equilibrium deadweight loss in duopoly

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    Problem:

    Two Identical Firms (Cournot Duopoly thus q1=q2) with demand of P=100-2Q and cost function of C(Q)=4Q. What is the equilibrium deadweight loss? Show the steps.

    Could be:
    $128
    $256
    $384
    $512

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    Solution Preview

    In a Cournot duopoly with identical firms, the demand function is given by P= A - BQ = A - B(q1 + q2) where q1 is output of firm 1 and q2 is output of firm 2.
    In equilibrium each firm produces qC1 = qC2 = (100 - MC)/3*B
    If P=100-2Q then we have P=100-2 (q1+ q2). This ...

    Solution Summary

    Equilibrium deadweight loss in Cournot duopoly given demand and cost functions

    $2.19