Consider a duopolistic market in which the inverse demand curve is ?=50−2? and the short-run total...

Consider a duopolistic market in which the inverse demand curve is ?=50−2? and the short-run total cost functions of the firms are given by ????1=10+2?1 and ????2=12+8?2.
a. Suppose this market is analyzed using a Cournot model. Determine the output level of each firm and the market price.
b. Suppose this market is analyzed using a Stackelberg model where firm 2 is the leader and firm 1 is the follower. Determine the output level of each firm and the market price.
c. Based on your findings in parts (a) and (b), determine the model that allows firm 1 to have higher profits. Similarly, determine the model that allows firm 2 to have higher profits.

Expert Solution

Rahul Sunny answered 1 year ago

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