The demand the duopoly firms face is p = 100 – 2Q where Q = q1 + q2. Each firm has the following cost function: c(qi) = 40 + qi^2/2, i = 1, 2. Find the Stackelberg equilibrium. Find the Cournot equilibrium.
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Step 1
In the Stackelberg equilibrium, one firm acts as the leader and the other firm acts as the follower. The leader will determine its output first, taking into account the follower's response. Let's assume firm 1 is the leader and firm 2 is the follower. The Show more…
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