The inverse demand for a homogeneous good is given by P(Q) = 5 –
2Q, where Q denotes the quantity of the good. The good is produced
by two quantity‐ setting firms. Firm 1 has a constant marginal cost
equal to c>0. Firm 2 has a constant marginal cost equal to
d∈[0,c]
1) Assume simultaneous competition. Derive price, quantities and
profits in the Cournot‐Nash equilibrium.
2) Assume now sequential competition, with firm 1 taking the
Stackelberg leader role. Derive price,...