Firms A and B produce identical goods which have average costs (and marginal costs) given by...

Firms A and B produce identical goods which have average costs (and marginal costs) given by cA = 6 and cB = 3, respectively. The demand function for industry output is given by Q = 13 − p, where p is the price of output.
1. Suppose the firms behave as Cournot competitors, determine the equilibrium price and output levels of the two firms.
2. Suppose firm A can successfully commit to a certain output level before firm B’s decision on how much to produce (`a la Stackelberg). Find the equilibrium output levels of the two firms.
3. Suppose they engage in Bertrand competition, find the equilibrium price and output levels of the two firms.

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Expert Solution

Rahul Sunny answered 1 year ago

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