Question

Suppose instead that Lysol and Clorox were competing using quantities (Cournot Competition). Also suppose that the respective marginal cost for each firm is Mysor = 2 = Aysor and MC clorox = 2 = AC clorox. The inverse demand equation is still P = 5-Q with the marginal revenue being MR = 5 - 2Q. To make the following questions easier for you, the reaction curves have already been derived. For Lysol the reaction curve is nysor = 1.5-0.50 clorox For Clorox the reaction curve is clorox = 1.5 -0.50 rysol a. Exactly how many units will Lysol and Clorox supply? i. Lysol supply: ii. Clorox supply: b. What price will disinfectant be sold for in the market?

Answer 1

cousnot equilibrium a) quayel retornar 5 & lyset 1.5-0.54 lysut i) Vlyset ü) Similarly clorex 101 b) S- (161) = $3 3x 1 c) i) TR lyset - Pavlyst 15 3x1 a) Thelorex $3 clorex in) Lysol Profit - TR - TC (3x) - (2x1) $1 20 iv) clorex Profit = (3x1) = (2+1) $ 2) fism Lysol , the stackleberg leader will choose its sot reaction fon. of firm clorex. output Vlysit to its profits 25 mat r lyst P Alysof - c(alyst) sit Actores los = o.s vyut 30 atlysol

i max Alysot 5-qve maa. r lyst = (8- q = (1.5-0.5 41 2q P.O.C sou 2 N 5-29 -1.5+q-2 co 89. 2 (a) 5-1.5-2 1.5-0.5(15) 0.78 S (15+0.75) P $2.75 d) (i) TRI 2.75*1.5 = $ 4.125 2.063 (in) TRC = 2.750.75= $