Carl and Simon are two rival pumpkin growers who sell the pumpkins at the local Farmer's Market, and their pumpkins are identical. The demand function at the farmer's market is q = 3200 - 1600p where q = qc + qs. The cost of producing for either farmer is $0.50 per pumpkin no matter how many pumpkins he produces. Carl and Simon make their production decisions at the same time. Unfortunately they cannot see what each other are doing. (Use Cournot equilibrium techniques)
How will Simon's reaction function look? Find Carl's reaction function.
Draw the two reaction functions with qc & qs on the two axes.
Prove (with statements) that equilibrium is reached at the point where the two equilibrium functions are crossing each other.
Solve for this point and find the qc & qs at the Cournot equilibrium.
Find the Total output, the price and the individual levels of profits.