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1. Consider the Leader-Follower game in which two firms each choose a quantity qi to bring...

1. Consider the Leader-Follower game in which two firms each choose a quantity qi to bring to the market, but in sequence. Firm 1 chooses q1, and then being informed of q1, firm w then chooses q2. The market has an inverse demand function P(Q) = 100 - Q, where Q = q1 + q2. Assume each firm has a constant marginal cost of 10.

(a) Solve by backward induction, state complete contingency plans for both firms.

(b) Compute the profits for each firm.

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