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Artesian Spring and Alpine Lake are duopolists in the market for bottled spring water. Consumers view the two products as identical and the daily inverse
Artesian Spring and Alpine Lake are duopolists in the market for bottled spring water. Consumers view the two products as identical and the daily inverse demand function for bottled spring water is P=6-\frac{\left(q_{1}+q_{2} ight)}{10}, where q1 denotes gallons of water bottled per day by Artesian Spring and q2 denotes gallons of water bottled per day by Alpine Lake. Artesian Spring can produce bottled water at lower cost than Alpine Lake; in particular, Artesian Spring's cost function is C1(q1)=q1 while Alpine Lake's cost function is C2(q2) = 2q2 . Suppose that Artesian Spring is located upstream from Alpine Lake, and therefore can (verifiably) commit to its production level before Alpine Lake chooses its production level. If the two firms compete as Stackelberg duopolists (i.e., choose output levels sequentially), what is the price of a gallon of bottled water in the Stackelberg equilibrium
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