Two Cournot competitors, Nick Limited(O¨rm 1) and Junior LLC(O¨rm 2), face an inverse demand curve p = 400 2q in the market (q = q1 + q2). Both producers have a marginal cost of $10 per unit.
(a) What is the reaction function for Nick Limited?
(b) How many units will each O¨rm produce? What will be the price in the market?
(c) What if Nick Limited chooses O¨rst (Leader) and Junior LLC follows (Follower). How many units will each O¨rm produce?
(d) Will the consumers be better or worse o§ in Stackleberg compared to the Cournot competition?