Will firm 2 expect higher or lower profit compared to profit

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Consider a duopoly case that firm 1 and firm 2 are producing homogeneous products:

(a) Suppose that the two firms compete in output and set their output levels simultaneously. Given that firm 1's reaction curve is Q1 = 150 - 2Q2 and firm 2's reaction curve is Q2 = 150 - 2Q1, what are the two firms' output levels in equilibrium?

(b) Suppose that the two firms compete in output but firm 1 can take the lead in setting its output level, will firm 1expect higher or lower profits compared to its profit in part (a)? Will firm 2 expect higher or lower profit compared to its profit in part (a)?

(c) Suppose that the two firms compete in price and have identical marginal costs, what will be their prices in equilibrium? Will the two firms have the incentive to raise prices to the level that maximizes joint profits? Briefly explain.

Reference no: EM13219278

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