Question: Please help with the following question: a. [6] Suppose the two firms compete on quantities. Find the Cournot-Nash equilibrium price and output of each firm.
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a. [6] Suppose the two firms compete on quantities. Find the Cournot-Nash equilibrium price and output of each firm. How much profit does each firm make? b. [8] Suppose that the two firms decide to form a cartel. What will the firms' profits be under a collusive arrangement? Are their profits different than in part(a)? Explain the intuition behind your finding. c. [4] Is the cartel is a stable arrangement in a one period interaction? Show supporting calculations. d. [8] Suppose instead that firm 2 has more foresight and gets the ring-tone to market faster, becoming the market leader, and that the firms continue to engage in quantity competition. i. [6] How much profit does each firm make? ii. [2] Are consumers better off under this market structure than under a simultaneous quantity setting duopoly? Explain your reasoning without calculating consumer surplus explicitly
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