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Refer to Table 17-10. Discuss the difference between the monopoly outcome and the Nash equilibrium.
On Jul 28, 2024
The monopoly outcome occurs at the highest total profit level of Q=6, P=$6, and profit=$36. If each duopolist pursues his/her self-interests, each will produce Q=4 for a total Q=8, P=$4, and each duopolist's profit will be half of $32 or $16. Because neither duopolist can do better by producing an output level different from 4, they reach a Nash equilibrium. This problem illustrates the tension between cooperation and self-interest.