1)The market demand curve for mineral water is P=15-Q. Suppose that there are two firms that produce mineral water, each with a constant marginal cost of 3 dollars per unit. Fill in the entries for each of the following duopoly models.
a)Cournot model (quantity competition).
b)Stackelberg model (quantity leadership).
Model Q1 Q2 Q P (Profit margin)1 (Profit margin)2
Cournot
Stackelberg
Write up your analysis, and compare your answers.
The quantity produced by firm 1 is denoted by Q1
The quantity produced by firm 2 is denoted by Q2.
The total quantity produced in the market is denoted by Q.
The market price is denoted by P.
Profit margin is P-MC.
Sample Solution
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