Consider a duopolistic market in which the market demand curve
is ?=90−3? and the marginal cost functions of the firms are given
by ??1=??2=10.
a. Suppose this market is analyzed using a Cournot model. Determine
the output level of each firm and the market price.
b. Suppose this market is analyzed using a Stackelberg model where
firm 1 is the leader and firm 2 is the follower. Determine the
output level of each firm and the market price.
c. Based on your findings in parts (a) and (b), determine the model
that allows firm 1 to have higher profits. Similarly, determine the
model that allows firm 2 to have higher profits.
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