in which two firms compete. Firm 1 faces TC1(Q) = 18Q and firm 2 faces TC2(Q) = 9Q. Suppose that firm 1 chooses their quantity first, then firm 2 sees that quantity, and then firm 2 sets their quantity (Stackelberg duopoly). (a) Find the reaction function for firm 2 (b) What is the marginal revenue for firm 1 (given that they know that firm 2 will best respond)? (c) Find the Stackelberg equilibrium (d) Determine profits for each firm and consumer surplus. (e) Which firm is better off?

in which two firms compete. Firm 1 faces TC1(Q) = 18Q and firm 2 faces TC2(Q) = 9Q. Suppose that firm 1 chooses their quantity first, then firm 2 sees that quantity, and then firm 2 sets their quantity (Stackelberg duopoly). (a) Find the reaction function for firm 2 (b) What is the marginal revenue for firm 1 (given that they know that firm 2 will best respond)? (c) Find the Stackelberg equilibrium (d) Determine profits for each firm and consumer surplus. (e) Which firm is better off?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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