4 Stackelberg vs Cournot with asymmetric costs Take the market inverse demand function P ( Q ) = A Q . Suppose that there are two firms. Firm 1 has constant marginal cost c 1 , while firm 2 has constant marginal cost c 2 . Assume that A > c 2 > c 1 > 0 . 4.a What are the Cournot equilibrium prices and quantities? Consumer surplus and Total surplus? Graph the best response functions. 4.b What are the Stackelberg equilibrium prices and quantities when firm 1 is the 1st mover? Consumer surplus and Total surplus? Graph firms 1's profit function taking into account its affect on firm 2's response. 4.c What are the Stackelberg equilibrium prices and quantities when firm 2 is the 1st mover? Consumer surplus and Total surplus? Graph firms 2's profit function taking into account its affect on firm l's response.
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4 Stackelberg vs Cournot with asymmetric costs Take the market inverse.docx
1. 4 Stackelberg vs Cournot with asymmetric costs Take the market inverse demand function P ( Q
) = A Q . Suppose that there are two firms. Firm 1 has constant marginal cost c 1 , while firm 2
has constant marginal cost c 2 . Assume that A > c 2 > c 1 > 0 . 4.a What are the Cournot
equilibrium prices and quantities? Consumer surplus and Total surplus? Graph the best response
functions. 4.b What are the Stackelberg equilibrium prices and quantities when firm 1 is the 1st
mover? Consumer surplus and Total surplus? Graph firms 1's profit function taking into account
its affect on firm 2's response. 4.c What are the Stackelberg equilibrium prices and quantities
when firm 2 is the 1st mover? Consumer surplus and Total surplus? Graph firms 2's profit
function taking into account its affect on firm l's response.
