IO 2 - static oligopoly models 0.0 / 5 ? EconomicsCournot Oligopoly UniversityAll boards Created by: erisedCreated on: 11-04-18 17:03 Why does equilibrium happen? No firm could increase its profits by changing its output level, given that the other firm produces the cornet output level. 1 of 9 What is firm 1's BR function? q1= R1(q2) = (a-c1/2b) -1/2q2 2 of 9 On a graph where is the Cournot-Nash equilibrium? Where the two BR functions cross 3 of 9 What is firm 1's production level? q1c = (a-2c1+c2)/3b 4 of 9 What happens if a firms MC decrease? Its BR function will shift outwards, the level it produces will increase and the equilibrium point will shift. 5 of 9 When c1=c2=2, what does each firm produce, total output and Pc? q1c=q2c=(a-c)/3b, Qc=2(a-c)/3b, Pc=(a+2c)/3 6 of 9 What id the Price-cost margin in the Cournot model? si/N - si=q1/Q(market share), 1/N=bqc/pc(inverse elasticity of demand. 7 of 9 What is average price-cost margin? (s1^2 + sc^2)/N = HHI/N 8 of 9 As number of firms increases what happens? Aggregate output increases, price tends to MC, individual profits fall, converges to perfect competition. 9 of 9
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