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Consider 2 airplane manufacturers that compete as Cournot duopaolists in the market for commercial aircraft. Arrowing (firm A) has a cost function given by c(qs)
Consider 2 airplane manufacturers that compete as Cournot duopaolists in the market for commercial aircraft. Arrowing (firm A) has a cost function given by c(qs) = % (a, whereas SkyTrain (firm $) has a cost function given by c(qg) = %qsz. The market demand function for commercial airliners is given by: Q=240 3P where () is the sum of the quantity of planes available for purchase. If we were to solve each firm's profit-maximization problem, treating the other firm's output level as fixed, we would find the following best response (BR) functions: y 1 BR4(qs) = q4 =119 . . 1 BRs(qs) = qs = 80 39a a) I the two companies choose the quantities of trips supplied simultaneously, find the Cournot equilibrium quantities supplied for each firm and the equilibrium price. What are each firm's profits earned? b} Suppose that firm A has the opportunity to choose their quantity of trips first, so that they are a Stackelberg leader. Find the Nash Equilibrium to this game and calculate the profits that each firm would receive. c) Compare profits from part (a) and part (b). Would firm A benefit from moving first? Does firm B benefit from moving last
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