Assume that there are four firms supplying homogeneous product and having identical cost functions C(Q)=40. Assume demand curve for the industry is given by P=100-Q
Suppose that each firm expects the others to behave as cournot competitors. What is the
a) Equilibrium industry output? Is it a Nash Equilibrium?
b)what is market price
c) What are the profit for each firm?
a) The equilibrium industry output is Q = 60. This is a Nash Equilibrium because each firm is maximizing its own profit given the expected behavior of the other firms.
b) The market price is P = 40.
c) The profit for each firm is π = 800.