Consider the following Stackelberg duopoly. Both firms produce a homogenous good. Firm 1 chooses how much to supply first. Firm 2 chooses how much to supply after observing the quantity supplied by firm 1. The market demand is Q=90-3P. For firm, the total cost of production is TC(q) = 10q, Firm 2 threatens that it will produce 30 no matter what. Is this threat credible?

Consider the following Stackelberg duopoly. Both firms produce a homogenous good. Firm 1 chooses how much to supply first. Firm 2 chooses how much to supply after observing the quantity supplied by firm 1. The market demand is Q=90-3P. For firm, the total cost of production is TC(q) = 10q, Firm 2 threatens that it will produce 30 no matter what. Is this threat credible?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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