Question

Suppose that two companies – A and B – are selling an identical product in the same market.

The market demand is thus determined as:

            P = f(Q_A, Q_B) = 100 – 2Q_A – Q_B

The total costs for A and B are respectively defined as:

            TC_A = 10 + 5Q_A +Q_A²

            TC_B = 20 – 5Q_B + Q_B²

Solve for the Cournot Model and the Cartel Model based on the information given above and fill in the table below:

	Points per box	Cournot Model Solution	Cartel Model Solution
QA	3
QB	3
QTOTAL	1
Profit of A (πA)	2
Profit of B (πB)	2
Total Profit (πA+πB)	1
Price charged (P)	1

Part B.

Explain the differences between the Cournot model and the Carte model, based on the information presented in the above table.

Answer 1