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Question 14 Consider a standard Stackelberg environment. Two firms produce heterogenous goods. The demand function for good i is q, = A - pi +

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Question 14 Consider a standard Stackelberg environment. Two firms produce heterogenous goods. The demand function for good i is q, = A - pi + p j, where Pi is the price. Firm i faces the following cost function: Tcmi) = MCI; + F. Firm 1 chooses the price first. Firm 2 chooses the price after observing p 1. In this environment, QP1>P2 0P1=P2 O Q1=42 0P1

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