Consider a market with two identical firms, Firm A and Firm B.
The market demand is ? = 20−1/2?, where ? = ?a +?b . The cost conditions are
??a = ??b = 16.
a) Assume this market has a Stackelberg leader, Firm A. Solve
for the quantity, price and profit for each firm. Explain your
calculations.
b) How does this compare to the Cournot-Nash equilibrium
quantity, price and profit? Explain your calculations.
c) Present the Stackelberg and Cournot equilibrium...