Compute the optimal profits for the firms

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Consider a market with inverse demand P(Q) = 100 - Q and two firms with cost function C(q) = 20q.

(a) Find the Stackelberg equilibrium outputs, price and profits (with firm 1 as the leader).

(b) Compute the optimal profits for the firms.

(c) Compare total profits, consumer surplus and social welfare under Stackelberg and Cournot. Are the comparisons intuitively expected?

Reference no: EM131244855

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