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Questions and Answers
What is the inverse demand function in the Cournot model?
$p(q) = \max{a - q, 0}$
What is the strategy space in the Cournot model?
$S_i = \mathbb{R}^+$
What is the payoff function for firm $i$ in the Cournot model?
$\pi_i(q_i, q_j) = p(q_i+q_j)q_i - cq_i$
What is the first-order condition for firm $i$ in the Cournot model?
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What is the objective of the firms in the Cournot model?
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Study Notes
Cournot Model Basics
- The inverse demand function in the Cournot model is a function that specifies the market-clearing price as a function of the total quantity supplied by all firms.
- The strategy space in the Cournot model consists of the set of possible output levels that each firm can choose.
Payoff Function and Objective
- The payoff function for firm $i$ in the Cournot model represents the profit of firm $i$, typically measured as revenue minus cost.
- The objective of the firms in the Cournot model is to maximize their profit by choosing the optimal output level, given the output levels of other firms.
First-Order Condition
- The first-order condition for firm $i$ in the Cournot model is a necessary condition for the optimal output level, which requires the marginal revenue of firm $i$ to equal its marginal cost.
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Description
Test your understanding of the Cournot model in duopoly economics with this quiz. Explore concepts such as quantity determination, inverse demand functions, marginal cost, and profit maximization.
