The market demand function is Q = 1,000 – 1,000p. Each firm has a marginal cost of m = 0.28 (28¢ per unit). Firm 1, the leader, acts before Firm 2, the follower. Solve for the Stackelberg equilibrium quantities, prices, and profits. Compare your solution to the Nash-Cournot equilibrium.
Answer to relevant QuestionsSuppose 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- ...The more an incumbent firm produces in the first period, the lower its marginal cost in the second period. If a potential rival expects the incumbent to produce a large quantity in the second period, it does not enter. Draw ...In Q& A 13.3, suppose that A = 12 but that profits under the current wage and high output are 14 for Firm 1 and 11 for Firm 2. Which wage would Firm 1 choose?What are the Nash equilibria if both Intel and AMD act simultaneously in the game in the Managerial Solution?Maoyong’s utility function with respect to wealth is U(W) = ln W (where “ ln W” means the natural logarithm of W). Plot his utility function and use your figure to determine whether Maoyong is risk averse.
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