Suppose that rm A enters in a duopoly market for production of commodity X at zero cost. He finds that the total demand

Question

Suppose that firm A enters in a duopoly market for production of commodity X at zero cost. He finds that the total demand for X in the market is 300 units. When he starts production, firm B enters in market. Find out the profit maximising quantity by each firm.

Answer 1

In order to maximise profit each firm will produce 1/3 of the total marker demand. In one example, total demand in the market is 300 units. Therefore, the profit maximising output is 1/3 x 300 = 100 units.