In a duopoly, each firm has marginal cost MC = 100, and market demand is Q...

In a duopoly, each firm has marginal cost MC = 100, and market demand is Q = 500 - 0.5p.

Assuming average cost is the same as marginal cost.

In which oligopoly, Cournot or Stackelberg, do firms have more market power?

a. Cournot since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg model.

b. Stackelberg since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg model.

c. Cournot since the Lerner Index in the Cournot model is about 1.08 times as much as that in the Stackelberg model.

d. Stackelberg since the Lerner Index in the Cournot model is about 1.08 times as much as that in the Stackelberg model.

Expert Solution

Rahul Sunny answered 8 months ago

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