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.

1. Compute the equilibrium quantity for the leader. Provide detailed solution (10 points).
2. Compute the equilibrium quantity for the follower. Provide detailed solution (10 points).
3. Compute the equilibrium profit for the leader. Provide detailed solution (10 points).
4. Compute the equilibrium profit for the follower. Provide detailed solution (10 points).
5. 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)

Answer rating: 100% (QA)

a Equilibrium Quantity for the Leader Firm 1 In a Stackelberg duopoly the leader Firm 1 chooses its ... View the full answer