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Luxottica and Warby Parker compete in the market for sunglasses. Luxottica is the market leader and...

Luxottica and Warby Parker compete in the market for sunglasses. Luxottica is the market leader and so they first choose how many sunglasses to produce each year, and then Warby Parker responds with their quantity choice. The marginal cost of producing sunglasses is $25 for each company. The total market demand for sunglasses is P = 250 – 0.5Q. According to the Stackelberg model, what is Warby Parker’s reaction function to Luxottica?

QWP = 250 - 0.5QL

QWP = 250 - QL

QWP = 225 - QL

QWP = 450 - 0.5QL

QWP = 225 - 0.5QL
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