How Many Firms Enter
Identical firms may each pay a fixed entry cost of 50 to produce a homogeneous good with zero marginal cost. The inverse demand is P = 100 − Q. Once n firms have entered, they play the Cournot quantity game. Entry continues as long as one more firm would still earn a non-negative profit net of the fixed cost. How many firms enter?
Related problems & prerequisites
Worth solving first
- Cournot Duopoly 3.0/10
- The Firm That Stays Out 3.0/10
- Bertrand Competition 3.0/10
Source: Original problem written for AxiomIQ, in the spirit of Cournot free-entry models.