Suppose the demand function is Q = 200 2p. Firm A, the leader, acts before Firm

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Suppose the demand function is Q = 200 – 2p. Firm A, the leader, acts before Firm B the follower. Both firms have a constant marginal cost of 10. Draw a diagram with Firm A’s output on the horizontal axis. Show the best- response function of Firm B. On the diagram, identify the Nash-Cournot solution, the Stackelberg solution, and the cartel solution.

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Managerial Economics and Strategy

ISBN: 978-0321566447

1st edition

Authors: Jeffrey M. Perloff, James A. Brander

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