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Duopoly with homogeneous product: quantity and price competition Consider a market with two firms (firms 1 and 2). The (inverse) demand curve is: p =

Duopoly with homogeneous product: quantity and price competition

Consider a market with two firms (firms 1 and 2). The (inverse) demand curve is: p = 30 - 2q where q= q1 + q2

Suppose Firm 1 has a marginal cost (c1) of 6 and Firm 2 has a marginal cost (c2) of 12. Assume neither firm has a fixed cost.

(1) Suppose firms choose quantities sequentially: Firm 1 chooses q1 and after that decision is known Firm 2 chooses q2. Calculate the subgame perfect nash equilibrium.

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