Question
Cournot and Stackelberg with Asymmetric Firms. In a market characterized by the following (inverse) demand function P = 40 - Q two firms compete a
Cournot and Stackelberg with Asymmetric Firms.In a market characterized by the following (inverse) demand function P = 40 - Q two firms compete a la Cournot. Firm A has production cost described by the cost functionTCa= 20qaandTCb=q2b
- Which firm has constant marginal costs? Which firm has increasing marginal costs?
- Find the reaction functions (best-response functions) of both firms.
- Compute the Cournot equilibrium quantities, price and profits (answers contain decimals).
- Firm A has the opportunity to move first, becoming the Stackelberg leader. Compute equilibrium quantities, price and profits in this case (answers contain decimals). Looking at the profits in this case, what can you notice?
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Marketing
Authors: Shane Hunt
3rd Edition
1260800458, 9781260800456
