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August 2, 2015

Homework Help: Microeconomics

Posted by James on Wednesday, April 9, 2008 at 9:15pm.

ok so i must have not payed attention in class when we talked about asymmetric costs in cournot duopoly's, so i am stuck on a homework problem. The problem reads as follows (*Note that my notation of c simply means Marginal Cost):

Consider a Cournot duopoly where inverse demand is P(Q) = a - Q but firms, 1 and 2, have asymmetric marginal costs, c1 and c2. What is the Nash equilibrium if 0 <ci < a/2 for each firm? What if c1 < c2 < a but 2c2 > a + c1?

Basically, I can get it down to each firm's individual reaction function's, but I am always used to assuming that the firms are identical (thus having the same marginal costs). I just wanted to maybe know the algebra behind this or simply the intution. If anyone could help that would be cool.

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