EyeOne supplies hospitals in the Midwest with medical safety glasses. They have only one competitor in the Midwest, SafetyTwo, and hospitals view both company's medical safety glasses as perfect substitutes. Thus, EyeOne and SafetyTwo are currently operating in a Cournot Duopoly in the Midwest market. The inverse monthly market

demand for medical safety glasses in the Midwest is P = 160 - 2Q, where total market

output is Q = Q1 + Q2. Let EyeOne be Q1 and SafetyTwo be Q2.

The monthly cost of producing a pair of medical safety glasses is estimated as C = 4Q

for both EyeOne and SafetyTwo.

EyeOne is considering making a monthly investment of $200 in a new sales and advertising campaign in an effort to become the preferred-supplier of medical safety glasses in the Midwest. If their campaign is successful, they will steal marketshare from their competitor and became the leader in the market for medical safety glasses in the Midwest (Stacklelberg Model).

Using Stackelberg:

1. What is EyeOne's output level?
2. What is EyeOne's price?
3. What is EyeOne's profit?
4. Should EyeOne move forward with the $200 monthly investment in a new sales and advertising campaign? Explain