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Stackelberg (1934) proposed a dynamic duopoly model in which a dominant (leader) firm decides first how much to produce and a subordinate (follower) firm decides
Stackelberg (1934) proposed a dynamic duopoly model in which a dominant (leader) firm decides first how much to produce and a subordinate (follower) firm decides its output level second. He assumes that the inverse market demand function is described by PQ = 8000-Q and that P = 1000-4Q the ith firm has a cost function given by Ci(qi) = 4qi + 10, with i= {1,2 }. Determines the reaction curve of firm 2 (follower), the quantities that each firm will produce (Nash equilibrium), and the market price that will be established.
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