Question
(Price-leader) There are 2 firms competing in the same industry, each with constant marginal cost c1 = 2, c2 = 4. The inverse aggregate demand
(Price-leader) There are 2 firms competing in the same industry, each with constant marginal cost c1 = 2, c2 = 4. The inverse aggregate demand function is P (Y ) = 100 Y , where Y = y1 + y2 is the total output. If firm 1 is the price leader and firm 2 follower.
(a) Find the price-leader equilibrium.
(b) Compare the profit to both firms with that in Cournot equilibrium. Does firm 1 really want to be the price leader?
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Power And Plenty Trade, War, And The World Economy In The Second Millennium
Authors: R Findlay, Ronald Findlay
1st Edition
0691143277, 9780691143279
