COURNOT’S DUOPOLY MODEL

2017 NOV III

Which of the following features belong to Cournots’ model of duopoly ?
(a) It yields determinate and stable equilibrium for the duopolists
(b) It is an adequate representation of Nash equilibrium
(c) If the duopolists combine to form a monopoly, the price changed by them will be less than the equilibrium price without their combining together.
Of the above which statements are true ? Choose from the code below :
A) All the above are correct
B) (a) and (c) are correct
C) (a) and (b) are correct
D) (b) and (c) are correct

ANS: (C)
I. Supplying 1/3 each (total 2/3)
II. Selling at price lower than monopoly price but above competitive price
III. Industry profit is not maximised
IV. It is a nash equilibrium