Two farmers, Tito and Helen, supply a chain of islands with kale. The inverse demand for kale

Question:

Two farmers, Tito and Helen, supply a chain of islands with kale. The inverse demand for kale in the islands is given by P = 60 – 0.5Q, where Q is the combined output of Tito (qT) and Helen (qH), measured in 10-pound bunches. Tito grows kale at a constant marginal and average cost of $12 per bunch; Helen grows kale at a constant marginal and average cost of $10 per bunch.

a. Suppose this market is a Stackelberg oligopoly and Tito is the first-mover. How much will he and Helen produce? What will the market price of kale be? How much profit will each farmer earn?

b. Now suppose that Helen is the first-mover in this Stackelberg oligopoly. How much will each farmer produce? What will the market price of kale be? How much profit will each farmer earn?

c. Quantify the value to Helen of being the first-mover in this Stackelberg game.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Microeconomics

ISBN: 9781319105563

3rd Edition

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

Question Posted: