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Cournot Oligopoly

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You are a truck farmer and bring produce to a farmer's market every Wednesday. You have found that on a typical day five other farmers bring their produce to market. Years of experience have taught you that you make the most money by pricing your produce at 1.15 times your marginal cost.

My questions are:
- What is the market elasticity of demand?
- What is your elasticity of demand in this Cournot oligopoly?

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Solution Summary

What is your elasticity of demand in this Cournot oligopoly?

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Answers:
a) For any given demand elasticity in a properly defined market, higher market shares reflect greater ability to set price above marginal cost. Since the truck farmer has an experience that by pricing the produce at 1.15 times the marginal cost, he had gained the ...

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