(Solved): 1. Consider a Cournot duopoly model with (inverse) aggregate demand P=aQ. Firms have asymmetric ...

Expert Answer

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For the Cournot duopoly model, the profit function for firm i is given by:

  

where    is the quantity produced by firm    and    is the total quantity in the market.


To find the Nash equilibrium, we need to solve for the best response of each firm to the other's production choice, i.e., we need to find the quantities    and    that maximize each firm's profit given the other firm's production quantity.