Unformatted text preview: 1 and Q 2 . c. Suppose (as in the Cournot model) that each firm chooses its profit-maximizing level of output on the assumption that its competitor’s output is fixed. Find each firm’s “reaction curve” (i.e., the rule that gives its desired output in terms of its competitor’s output). d. Calculate the Cournot equilibrium (i.e., the values of Q 1 and Q 2 for which both firms are doing as well as they can given their competitors’ output). What are the resulting market price and profits of each firm?...
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- Fall '09
- Monopoly, competitor’s output, second. Market demand