“No great thing is created suddenly.”

This was a difficult enough to get understand at first so I thought I’d go ahead and post my notes

Steps to follow when working a Cournot Problem.

Cournot Model
Steps:
1. Plug in equations into TR: (P*Q)
2. Then MR (derivative of TR)
3. Then find TC (from production function if it is not given)
4. Then MC (derivative of TC)
5. Then set MC=MR
6. Solve for q1 after setting MC to MR

• See if it’s symmetric (Symmetric if the MC is equal for the 2 firms, you can have a different TC, MC just needs to be the same)
  • If it’s symmetric, move to step 7
• If it’s not symmetric: repeat steps 1-6 for each firm

7. Find Price (Using given equation for P, by plugging in q’s, this is where the symmetric trick comes in, the q’s are equal)
8. Calculate TR (P*Q: Plug in values for q1 and P)
9. Calculate TC (Plug in values)
10. Calculate Profit (TR-TC)

I came up with these working with Professor Deck, so they should be right.

Note:
1.Steps may be missing if the firm is not symmetric: I don’t have the extra steps here that may be required.

2. You can determine if the problem is symmetric by seeing whether or not the Marginal Cost(MC) for each for firms are the same.
If they are not the same, the problem is not symmetric and will require extra work.

Here is a link to a more thorough explanation of this model. Also, here is the link to the Wikipedia article.