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Perfectly competitive market equilibrium

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Reference no: EM133125902

There are two firms in a market. Assume the demand function in the market is Q=100-P. Each firm has MC=AC=20.

  1. Assume they compete according to the Stackelberg Model. Firm 2 is the leader, and Firm 1 is the follower. Find the profit maximizing output, price and profit for the market and each firm. Please show all your work. Is there a first mover advantage?
  2. If the firms competed according to the Bertrand model, what would be the profit maximizing output, price and profit for the market and each firm?
  3. How does this Bertrand equilibrium compare to a perfectly competitive market equilibrium? Please explain. (Hint: Bertrand Paradox)

Reference no: EM133125902

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