Suppose instead that firm 1 was the Stackelberg leader in this market. Rewrite firm 1s profit function,
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Suppose instead that firm 1 was the Stackelberg leader in this market.
Rewrite firm 1’s profit function, using firm 2’s reaction function, and solve for the Stackelberg equilibrium. Once you have solved for the equilibrium market price and total market demand, you should be able to tell whether consumer surplus has increased or decreased.
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Related Book For
Managerial Economics A Strategic Approach
ISBN: 285451
2nd Edition
Authors: Robert Waschik ,Tim Fisher ,David Prentice
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