Problem The duopoly model describes a market with two firms only. They produce the same product and the supply is Q = q1 + q2. The demand for this product is of a linear form p(Q) = a−bQ where p is the price of the product.

| August 14, 2017

Problem The duopoly model describes a market with two firms only. They produce the same product and the supply is Q = q1 + q2. The demand for this product is of a linear form p(Q) = a−bQ where p is the price of the product. The firms have different production costs given by Ci(qi) = ci + diqi, i = 1,2. Because the marginal cost di must be lower than maximal market price a, so the following condition should be fulfilled: di < a. The profit of the firm i is Πi …

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