The inverse demand for a homogeneous-product Stackelberg duopoly is P = 12,000 -5Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 3,000QL and CF (QF) = 6,000QF..
a. What is the follower’s reaction function?
QF =_______ - _______QL
b. Determine the equilibrium output level for both the leader and the follower.
Leader output:
Follower output:
c. Determine the equilibrium market price. $________
d. Determine the profits of the leader and the follower.
Leader profits: $
Follower profits: $