Both firms in a Cournot duopoly would enjoy lower profits if:
A) the firms simultaneously reduced output below the Nash equilibrium level.
B) each firm simultaneously increased output above the Nash equilibrium level.
C) one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

In a Cournot duopoly, firms choose quantities to maximize their own profit given the quantity chosen by the other firm. If both firms increase output above the Nash equilibrium level, the market price will fall, leading to lower profits for both firms.

Both Firms in a Cournot Duopoly Would Enjoy Lower Profits