Unformatted text preview: 2. Dixit and Skeath, Chapter 5, Problem 2. 3. In class, we dealt with Cournot duopoly competition with two firms when the firms had constant marginal cost. Now suppose that the cost function for Firm 1 is given by ܿ ଵ ሺݍ ଵ ሻ ൌ ݍ ଵ ଶ , while the cost function for firm 2 is ܿ ଶ ሺݍ ଶ ሻ ൌ 2ݍ ଶ ଶ . The firms face a market inverse demand given by ܲ ൌ 230 െ ሺݍ ଵ ݍ ଶ ሻ . Find the Nash Equilibrium of this game. From the point of view of the two firms, is the Nash Equilibrium Pareto Efficient? Explain. 4. Dixit and Skeath, Chapter 5, Problem 6....
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- Spring '07
- Economics, Alice, a+b, Nash Equilibrium Pareto