Suppose that inverse demand is given by p(Q) = a-bQ, where Q is total quantity supplied in the market. There are two firms in the market, each with a cost function of c(q) = cq, now assume that the first firm moves before the second firm.
A) Compare the price level and level of output under Stackelberg to Cournot
B) What is the fundamental reason that the first firm in the stackelberg model is able to earn higher profits than in the Cournot model.