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A homogeneous product duopoly faces a market demand function given by ? = 100 − 0,5?...

A homogeneous product duopoly faces a market demand function given by ? = 100 − 0,5? ? = ?! + ?!

a. According to Cournot oligopoly model what would be equilibrium price of market and what would be output levels that maximizes profits of both firms with given cost functions.

?! = 5?! ?! = 0,5?!

b. If the firms agreed to make a collusion and set a higher price as if they are monopoly. What would be market price, total profit and output levels of each firm.

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Answer #1

output of each firm = 47.5/2 = 23.75

Profit of each firm = 2256.25/2 = 1128.125

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