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3. There are two firms that compete according to Cournot competition. Firm 1 has a cost function G(91) = 5.59+12. Firm 2 has
(e) Use your best response equations to mathematically solve for the equilibrium quantities qi 9, Q. equilibrium price p, a
() Now assume the two firms are colluding. Setup the joint profit maximization for the colluding firms (also known as the joi
(g) Solve the collusion profit maximization problem for equilibrium quantities qi.9.Q, equilib- rium price p, and profit fo
(h) Consider individual firm profits between parts e) and g). Will both these two firms agree to collude if they split the pr
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that compete according -32 There are two firms to Counnot competition. cost function of firm 1 firm 2 has a cost fuction Ouvufim a Equation (1) is the reaction fraction for Now Total revenue for firm 2 Pre=9600- _ (21+9)/2 = 6002 - ² 2 - 1 2 Now MargNow from (1) supstituting 91=45.99 wight 24q1th = 1200 -) 24(45.11) +22 - 12.00 -) 2 = 1200 - 1103.76 - 96:24 CD This Totul o27594 - 1057.54 – 2213.03) - (11644.94) profit for * The $ 12678.49 firm 2 = TR2 - The -5600(96-24) - £ (96.24845.42) --Ź(46:11- 960 -2 (21+4) (2pcs) - 5c12) 76.600 - 60041 - - - 12 60021+ 6009 - 11 21 - 4 21 21 - 22 - 2 22 - 5,597 + 12+2.522 +189. 6122, +92 = 600 ~- X6 qj +6222 60-ndi, x1 7291 +62 + 3600 21+ 6% = 600 7121 = 300 a = 42.25 4 +62 = 600 42.25 + 622=600 920 92Nou & Joint-Profits will be 772 600 (42.25) +600 (92.95) - + (42.25) -Ź (42.25X92195) - 192,95) - 5.5 (42.25) - 2.5(92,99 – 3pro wit equally at they split the each will get I = 49,475,318 2 $20.237.6529 b They will not agree to colleude it they split

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