The inverse demand for a homogeneous-product Stackelberg duopoly is P = 20,000 -4Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 2,000QL and CF (QF) = 4,000QF.
a) What is the follower’s reaction function? QF =___?____ - ____?____ QL (Fill in the blank & show equation)
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: $ ?