Both firms in a Cournot duopoly would enjoy lower profits if:
A) the firms simultaneously reduced output below the Nash equilibrium level.
B) each firm simultaneously increased output above the Nash equilibrium level.
C) one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output.
D) None of the preceding answers is correct.

Question

Quizplus · Accepted Answer

In a Cournot duopoly, if each firm increases its output above the Nash equilibrium level, it leads to an oversupply in the market, which drives down prices and reduces profits for both firms.

Both Firms in a Cournot Duopoly Would Enjoy Lower Profits