1)What is called Best Response or Reaction Function in the context of the Cournot Oligopoly model?...

1)What is called Best Response or Reaction Function in the context of the Cournot Oligopoly model?

Given the market demand curve faced by the Stackelberg duopolies

P = 120 – 0.5QD MCA = $20

QD = QA + QB MCB = $34

Where the leader firm is Firm A and the follower is Firm B

Hints:

TRB = P * QB

MRB = ¶TRB / ¶QB

a)Anticipating Firm B’s reaction to its output level, what is the output level Firm A will be deciding to produce?

b)What is the total industry output, QD?

Expert Solution

Rahul Sunny answered 1 year ago

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