Cournot Quantity Competition in Oligopoly Market
The demand for a mysterious good X in is Q = 10 − P , where P is the price of good X per pound and Q is the quantity demanded in pounds. The marginal cost of producing the good is $2 per pound. There is no fixed cost of producing the good. There are two firms, Abe and Bob, who can produce the good.
1. Find each firm’s Nash equilibrium price and quantity.
2. What is the price elasticity of demand at the duopoly price?