Suppose that two firms are Cournot competitors. Industry demand is given by P = 200 − q1 − q2, where q1 is the output of Firm 1 and q2 is the output of Firm 2. Both firms face constant marginal and average total costs of $20. Firm 1 is considering investing in costly technology that will enable it to reduce its costs to $15 per unit. What is the most Firm 1 would be willing to pay if it can guarantee that Firm 2 will not be able to acquire it? Assume that initially each firm is in Cournot equilibrium without the new technology.
$333.33
$411.11
$444.44
$366.66