Consider the inverse demand function below for a market with 2 dominant firms: P=600-3(Q 1 +Q 2
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Question:
Consider the inverse demand function below for a market with 2 dominant firms:
P=600-3(Q1+Q2)
Assume that both firms have identical marginal costs: $300, yet one of them, Firm 1, is the leader and the other one, Firm 2, is the follower.
- Compute the equilibrium quantity for the leader. Provide detailed solution (10 points).
- Compute the equilibrium quantity for the follower. Provide detailed solution (10 points).
- Compute the equilibrium profit for the leader. Provide detailed solution (10 points).
- Compute the equilibrium profit for the follower. Provide detailed solution (10 points).
- Which oligopoly case did you follow to provide your answers to parts a-d: Bertrand's, Cournot's, Stackelberg's, or Sweezy's? Explain why. (5 points)
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