In a Cournot Duopoly, Both Firms Face the Market Demand

question 20

Essay

In a Cournot duopoly, both firms face the market demand: P = 100 - Q_D, where P is price and Q_D is total quantity demanded in the market. Firm 1's cost function is given by C₁ = .8Q₁² and firm 2's cost function is given by C₂ = 6Q₂, where Q₁ is firm 1's output and Q₂ is firm 2's output. Derive firm 1's optimal reaction function.

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