Markup rule for Cournot Oligopoly Homogeneous product Cournot oligopoly n=total number of firms in the industry Market elasticity of demand EM Elasticity of individual firm's demand is given by EF=NEM P=[EF/(1+EF)×MC,So P=NE/(1+NEM)×MC The greater the number of firms the lower the profit-maximizing markup factor Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Markup Rule for Cournot Oligopoly • Homogeneous product Cournot oligopoly • N = total number of firms in the industry • Market elasticity of demand EM • Elasticity of individual firm’s demand is given by EF = N EM • P = [EF /(1+ EF )]  MC, so • P = [NEM/(1+ NEM)]  MC • The greater the number of firms, the lower the profit-maximizing markup factor