Consider a Stackelberg duopoly in which firm 1 sets q. firm 2 observes q, and then chooses q a. Firm 1 chooses q, SMALLER than the static best response to q, because this moves total output closer to the monopoly output. Ob. Firm 1 chooses q, LARGER than the static best response to , because this moves total output closer to the monopoly output Ⓒc. Firm 1 chooses q, LARGER than the static best response to, because this results in a smaller Odq, is a static best response to ₂

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Consider a Stackelberg duopoly in which firm 1 sets q, firm 2 observes y, and then chooses
Ⓒa. Firm 1 chooses q, SMALLER than the static best response to q, because this moves total output closer to the monopoly output.
b. Firm 1 chooses , LARGER than the static best response to
Oc. Firm 1 chooses q, LARGER than the static best response to ₂
Odq, is a static best response to ₂
because this moves total output closer to the monopoly output
because this results in a smaller q. 2
Transcribed Image Text:Consider a Stackelberg duopoly in which firm 1 sets q, firm 2 observes y, and then chooses Ⓒa. Firm 1 chooses q, SMALLER than the static best response to q, because this moves total output closer to the monopoly output. b. Firm 1 chooses , LARGER than the static best response to Oc. Firm 1 chooses q, LARGER than the static best response to ₂ Odq, is a static best response to ₂ because this moves total output closer to the monopoly output because this results in a smaller q. 2
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