2. Walmart (firm 1) and Amazon (firm 2) are a duopoly in the grocery market. They are faced with an inverse demand of P(Q₁, Q2)-16-2(Q1+Q2) and total costs of TC(Q.) - 207,i=1,2. Note that the marginal cost is not constant! 1. Obtain the Cournot equilibrium quantities and profits. 2. Obtain the Stackelberg equilibrium in which Walmart moves first. Compare with the Cournot equilibrium. 3. Obtain the cartel outcome (= shared monopoly). Compare with Stackelberg and Cournot.
2. Walmart (firm 1) and Amazon (firm 2) are a duopoly in the grocery market. They are faced with an inverse demand of P(Q₁, Q2)-16-2(Q1+Q2) and total costs of TC(Q.) - 207,i=1,2. Note that the marginal cost is not constant! 1. Obtain the Cournot equilibrium quantities and profits. 2. Obtain the Stackelberg equilibrium in which Walmart moves first. Compare with the Cournot equilibrium. 3. Obtain the cartel outcome (= shared monopoly). Compare with Stackelberg and Cournot.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.4P
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Step 1: Define Duopoly
VIEWStep 2: Determine the Cournot equilibrium quantities and profits
VIEWStep 3: Obtain the Stackelberg equilibrium in which Walmart moves first and compare that with Cournot
VIEWStep 4: Obtain the cartel outcome (-shared monopoly) and compare with Stackelberg and Cournot
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