Consider a Stackelberg duopoly with the demand function p=10-Q where Q=q +q,. Firms 1 and 2 have marginal costs of c and c, respectively. a) What is a strategy for firm 2 in this setting? b) Find firm 2's best-response function. c) Given firm 2's best-response function, find the Subgame Perfect Equilibrium strategy profile.

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Chapter1: Making Economics Decisions
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2. Consider a Stackelberg duopoly with the demand function p =10-Q where
Q=q, +q,. Firms 1 and 2 have marginal costs of c, and c, respectively.
a) What is a strategy for firm 2 in this setting?
b) Find firm 2's best-response function.
c) Given firm 2's best-response function, find the Subgame Perfect Equilibrium
strategy profile.
d) Which firm produces more in the Subgame Perfect Equilibrium?
Transcribed Image Text:2. Consider a Stackelberg duopoly with the demand function p =10-Q where Q=q, +q,. Firms 1 and 2 have marginal costs of c, and c, respectively. a) What is a strategy for firm 2 in this setting? b) Find firm 2's best-response function. c) Given firm 2's best-response function, find the Subgame Perfect Equilibrium strategy profile. d) Which firm produces more in the Subgame Perfect Equilibrium?
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