In an industry where demand is Q = 120 – P and two identical firms have...

In an industry where demand is Q = 120 – P and two identical firms have MC = AC = 30 find the Cournot and the Stackelberg equilibriums and compare the corresponding market outcomes. Do consumers have a preference for one market structure over the other?

Expert Solution

Since the price is smaller in Stackelberg (52.5<60) and the output is also higher in Stackelberg than Cournot(67.5>60), so the consumer surplus will be greater in case of Stackelberg. Thus the consumers would prefer Stackelberg market structure over the Cournot duopoly.

Rahul Sunny answered 2 years ago

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