Unformatted text preview: simplicity's sake, let's assume that all firms face the same cost structure as follows: MC_i = 10 for all firms I Given this market demand curve and cost structure, we want to find the reaction curve for Firm 1. In the Cournot model, we assume Q i is fixed for all firms i not equal to 1. Firm 1's reaction curve will satisfy its profit maximizing condition, MR 1 = MC 1 . In order to find Firm 1's marginal revenue, we first determine its total revenue, which can be described as follows Total Revenue = P * Q1 = (100  Q) * Q1 = (100  (Q1 + Q2 +. ..+ Qn)) * Q1 = 100 * Q1  Q1 ^ 2  (Q2 +. ..+ Qn)* Q1 The marginal revenue is simply the first derivative of the total revenue with respect to Q 1 (recall that we assume Q i for i not equal to 1 is fixed). The marginal revenue for firm 1 is thus: MR1 = 100  2 * Q1  (Q2 +. ..+ Qn)...
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 Fall '08
 JOMINY
 Economics, Microeconomics, Oligopoly, Supply And Demand, Firm, market demand curve, Cournot Model

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