Two firms, 1 and 2, compete in a market for a homogeneous good by choosing the quantity they produce.

Market demand is given by = 10 1.

The cost of firms is represented by the function () = 1 + .

Where is the entry cost of the firm . Let's initially assume that both firms have already entered and established themselves in the market a long time ago, such that the cost of entry () is irrelevant.

(a) Calculate the Cournot equilibrium (price, quantity of each firm and their profit)

(b) Calculate the equilibrium of the Stackelberg game, where firm 1 is the leader and firm 2 is the follower (price, quantity of each firm and their profit)