Answer to Question #213898 in Microeconomics for Thembz

Question

Find the courtnot-Nash equilibrium

Answer 1

The Cournot model of oligopoly posits that competing companies create a homogeneous product and that each tries to maximize profits by deciding how much to produce. As a result, all companies pick output (quantity) at the same time. The resultant equilibrium is a Cournot (Nash) equilibrium, which is a Nash equilibrium in quantities.

Consider Tom and Sam playing a game. In this basic game, both players can pick strategy A, which results in a $1 gain, or strategy B, which results in a $1 loss. Both players, logically, select option A and earn a $1 payout. Thus, Nash equilibrium is represented by Outcome A.