Cournot Equilibrium
The dancing mcahine industry is a duopoly. The two firms, Chuckie B corp and Gene Gene Dancing Machines, compete through Cournot quantity-setting competition. The demand curve for the industry is P = 120-Q, where Q is the total quantity produced by Chuckie B and Gene Gene. Currently, each firm has marginal cost of $60 and not fixed cost.
First question is What is the equilibirum price, quantity, and profit for each firm? I got price:$80, Quantity (each):20, and Profit:$400.00
Part B is where I am struggling
Chuckie B corp. is considering implementing a proprietary technology with a one-time sunk cost of $200. Once this investment is made, marginal cost will be reduced to $40. Gene Gene has no access to this or any other cost saving technology, and its marginal cost will remain at $60. SHould CHuckie B invest in the new technology? (hint: you must compute another cournot equilibrium)
Cournot Equilibrium
The dancing mcahine industry is a duopoly. The two firms, Chuckie B corp and Gene Gene Dancing Machines, compete through Cournot quantity-setting competition. The demand curve for the industry is P = 120-Q, where Q is the total quantity produced by Chuckie B and Gene Gene. Currently, each firm has marginal cost of $60 and not fixed cost.
First question is What is the equilibirum price, quantity, and profit for each firm? I got price:$80, Quantity (each):20, and Profit:$400.00
Part B is where I am struggling
Chuckie B corp. is considering implementing a proprietary technology with a one-time sunk cost of $200. Once this investment is made, marginal cost will be reduced to $40. Gene Gene has no access to this or any other cost saving technology, and its marginal cost will remain at $60. SHould CHuckie B invest in the new technology? (hint: you must compute another cournot equilibrium)
