The inverse demand for a homogeneous product Stackelberg duopoly is P = 14000 – 20. The cost functions for the leader and follower are C(Q.) = 2000Q, and Cf(QF) = 4000QF, respectively. a) What is the follower's revenue function? Note that MRF = 14,000-2Qi-4QF and MCF = 4,000. b) What is the follower's reaction curve? c) Determine the equilibrium output level for both the leader and the follower. [Note that for a quadratic revenue function R(Q)=aQ²+bQ+c, it holds that MR(Q)=2aQ+b.]

The inverse demand for a homogeneous product Stackelberg duopoly is P = 14000 – 20. The cost functions for the leader and follower are C(Q.) = 2000Q, and Cf(QF) = 4000QF, respectively. a) What is the follower's revenue function? Note that MRF = 14,000-2Qi-4QF and MCF = 4,000. b) What is the follower's reaction curve? c) Determine the equilibrium output level for both the leader and the follower. [Note that for a quadratic revenue function R(Q)=aQ²+bQ+c, it holds that MR(Q)=2aQ+b.]

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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