Consider a market in which all output is produced by two firms, A and B. The...

Consider a market in which all output is produced by two firms, A and B. The market inverse demand curve is given by where a is 260 and b is 1. Both firms have a constant marginal cost equal to 3.
a) Find the Stackelberg equilibrium outputs for firms A and B, the equilibrium market price, and the equilibrium profit for each firm, on the assumption that firm A is the
leader and firm B is the follower.
b) Repeat for:
i. the case where the marginal cost of firm B is constant and equal to 9.
ii. The case where there are two firms A and B and the marginal cost for firm A is mAQA (where mA is 1) and the marginal cost for firm B is mBQB (where mB is 8).
iii. The above two cases on the assumption that B is the leader and A the follower.

Expert Solution

Rahul Sunny answered 2 years ago

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