Stackelberg. Two firms share an oligopoly market. The first firm, Albert Co., enters the market first. At the beginning, it sees the whole market and determine the production level !. However, it is aware that another firm, Bob Co., will be its follower and will produce " when entering the market. Albert Co. takes this action into its consideration when it determines its ! in the first stage. Assume that the market's demand curve is

= (! + "), and the cost functions are (!) = !! for Albert Co. and (") = "" for Bob Co., respectively.

(1) Find Bob Co.'s response function " = "(!).

(2) Determine the equilibrium of this model by finding ! and " as functions of , , !, ".

(3) Find the profits for Albert Co. and Bob Co., then explain whether the market has the leader advantage.