Complexity Explorer Santa Fe Institute

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Game Theory I • Static Games

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7.1 Cournot Competition » Quiz Solution

Question: Recall the game from lesson 7. Suppose rm 1's per-unit marginal cost increases (c1 increases).

What happens to the Nash equilibrium quantity for player 2?

Answer: (a)  Increases

Explanation: The equilibrium quantity for rm 2  is . Increasing c1 therefore increases q*2.