Consider the following three- rm oligopoly model
p =20 -Q
Q =q1 +q2 +q3 TC1 =2q1
TC2 =2q2
TC3 =2q3
(i) What is the Cournot solution?
(ii) Firm i chooses qi(t) to maximise 1ri(t), assuming qj(t)=qj(t -1) for all j =l= i. What are the dynamic adjustment equations?
(iii) Show that no matter which rm is the monopolist in period 0, the system moves to one of oscillations in which the Cournot solution is never reached.