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4. Consider American Airlines and United Airlines have a duopoly in a single market. Solve the NashStackelberg equilibrium quantities and market price if American Airlines
4. Consider American Airlines and United Airlines have a duopoly in a single market. Solve the NashStackelberg equilibrium quantities and market price if American Airlines were the Stackelberg leader and United Airlines were the follower. Both firms face MC=147. Market demand is Q= 339p, the United Airlines best-response function is qU=9621qA. (this question is identical to Solved Problem 13.3 in the text book, for guidance!) a. Determine the inverse residual demand function facing American Airlines. By subtracting United's best-response function from the market demand function b. Determine American's Marginal Revenue curve. Solve for American Airline's profit maximizing output (q) by equating its marginal revenue and marginal cost. c. Use United Airline's best-response function to solve for their profit maximizing q. Add the two profit maximizing quantities to get the market Q. d. Use the market demand function to solve for the market price
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