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Managerial Economics

Firm 1 Chooses output and Firm 2 follows suit.Given that the followers best reaction Function (BR2(q1)q1- c(q1) 

-Assume market demand is P(Q)=a-bQ=a-b(q1+q2)

-Assuming also two identical firms with marginal cost m and no fixed costs

    c(qi)=cqi  where i= Firm 1 or Firm 2 and Q=q1 or q2

QUESTION: Calculate profit maximization output of each firm where Firm 1 is a Stackelberg Leader.



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