Explain how output will each of them produce in equilibrium

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Reference no: EM1363513

Consider the wine business in a small country where wine is difficult to grow. The demand for wine is given by p = $480 - 0.2Q, where p is the price and Q is the total quantity sold. The industry consists of just the two duopolists, Plonk and Brew. Imports are prohibited. Plonk faces total costs of $6Q and Brew has total costs of $18Q.

(i) If Plonk and Brew operated in a Cournot oligopoly, how much output will each of them produce in equilibrium?

(ii) If, instead, Plonk was the Stackelberg leader, and Brew was therefore the Stackelberg follower, how much output would each produce in equilibrium?"

Reference no: EM1363513

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