Handout on N-firm Cournot

Handout on N-firm Cournot - The n-Firm Cournot Market...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: The n-Firm Cournot Market Introduction Suppose n firms each produce a homogeneous product with no costs of production. Let market price be linear in the combined output of all n firms in the market and of the form P = a- b n X i =1 q i where q i is the output of the i-th individual firm. Consider the situation of some firm, j , Firm j must decide how much to produce. If j is a Cournot competitor , it will formulate its plans under the assumption that each of its ( n-1) rivals will continue to produce whatever output they currently produce, no matter what firm j does. Thus, from j s point of view, the total output of all firms other than itself the combined output of all its rivals is constant. Then from j s point of view, market price is related to its own choice of output according to the equation P = a- b n X i =1 i 6 = j q i - bq j . Because j believes the output of his rivals will remain unchanged, this demand curve j faces is of the form P =...
View Full Document

Page1 / 2

Handout on N-firm Cournot - The n-Firm Cournot Market...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online