0
$\begingroup$

My question is based on a Cournot competition model with linear demand, $p=a-bQ$, but can also be applied to most competition models.

I wanted to know whether there is some special interpretation of the difference between the size of the market, $a$, and the marginal cost of the firms $c$. I understand that you have to assume that $a>c$, otherwise firms won't have an incentive to operate at all. But is there some other interpretation of $a-c$? Perhaps something to do with market power?

Thank you and sorry for the noob question.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.