The market demand curve for a pair of duopolists is given as P = 21 − 2Q, where Q = Q1 + Q2. The constant per unit marginal cost is $9 for each duopolist. Find the equilibrium price, total quantity and profit for each firm, assuming the firms act as a Stackelberg leader and follower, with firm 1 as the leader.
The market demand curve for a pair of duopolists is given as P = 21 − 2Q, where Q = Q1 + Q2. The constant per unit marginal cost is $9 for each duopolist. Find the equilibrium price, total quantity and profit for each firm, assuming the firms act as a Stackelberg leader and follower, with firm 1 as the leader.
Chapter8: Monopoly
Section: Chapter Questions
Problem 3SQ
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The market demand curve for a pair of duopolists is given as P = 21 − 2Q, where Q = Q1 + Q2. The constant per unit marginal cost is $9 for each duopolist. Find the
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VIEWStep 2: Determine the profit function of each firm:
VIEWStep 3: Determine the best response for firm 2:
VIEWStep 4: Determine the optimal quantity for leader firm:
VIEWStep 5: Determine the optimal quantity for firm 2, total quantity by both firm and price:
VIEWStep 6: Determine the profit for each firm:
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ISBN:
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Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc