in which two firms compete. Firm 1 faces TC1(Q) = 18Q and firm 2 faces TC2(Q) = 9Q. Suppose that firm 1 chooses their quantity first, then firm 2 sees that quantity, and then firm 2 sets their quantity (Stackelberg duopoly). (a) Find the reaction function for firm 2 (b) What is the marginal revenue for firm 1 (given that they know that firm 2 will best respond)? (c) Find the Stackelberg equilibrium (d) Determine profits for each firm and consumer surplus. (e) Which firm is better off?
in which two firms compete. Firm 1 faces TC1(Q) = 18Q and firm 2 faces TC2(Q) = 9Q. Suppose that firm 1 chooses their quantity first, then firm 2 sees that quantity, and then firm 2 sets their quantity (Stackelberg duopoly). (a) Find the reaction function for firm 2 (b) What is the marginal revenue for firm 1 (given that they know that firm 2 will best respond)? (c) Find the Stackelberg equilibrium (d) Determine profits for each firm and consumer surplus. (e) Which firm is better off?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.3P
Related questions
Question
![Consider a market with demand P(Q) = 39-3Q
in which two firms compete. Firm 1 faces
TC1(Q) = 18Q and firm 2 faces TC2(Q) = 9Q.
Suppose that firm 1 chooses their quantity
first, then firm 2 sees that quantity, and then
firm 2 sets their quantity (Stackelberg
duopoly).
(a) Find the reaction function for firm 2
(b) What is the marginal revenue for firm 1
(given that they know that firm 2 will best
respond)?
(c) Find the Stackelberg equilibrium
(d) Determine profits for each firm and
consumer surplus.
(e) Which firm is better off?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4bab7a07-99b7-43c6-bd28-990b9ededc28%2Ffd288102-3975-4b97-80d0-67cd6a864201%2Fbc0sj2s_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a market with demand P(Q) = 39-3Q
in which two firms compete. Firm 1 faces
TC1(Q) = 18Q and firm 2 faces TC2(Q) = 9Q.
Suppose that firm 1 chooses their quantity
first, then firm 2 sees that quantity, and then
firm 2 sets their quantity (Stackelberg
duopoly).
(a) Find the reaction function for firm 2
(b) What is the marginal revenue for firm 1
(given that they know that firm 2 will best
respond)?
(c) Find the Stackelberg equilibrium
(d) Determine profits for each firm and
consumer surplus.
(e) Which firm is better off?
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