Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.What is the market price in the Nash equilibrium?

Question

Quizplus · Accepted Answer

The Nash equilibrium is the point where neither firm can improve its profit by changing its output, given the output of the other firm. In this case, the Nash equilibrium is where each firm produces 6,000 cubic yards of concrete, for a total market output of 12,000 cubic yards. The market price is then $86.67 per cubic yard.

Kate and Alice Are Small-Town Ready-Mix Concrete Duopolists