Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 9

The inverse demand for a homogeneous-product Stackelberg duopoly is P = 16,000 - 4 Q. The cost structures for the leader and the follower, respectively, are C L ( Q L ) = 4,000 Q L and C F ( Q F ) = 6,000 Q F.
a. What is the follower's reaction function?
b. Determine the equilibrium output level for both the leader and the follower.
c. Determine the equilibrium market price.
d. Determine the profits of the leader and the follower.