Homework Answers
In Stackleberg duopoly model the market leader is the first mover and the other firm follows sequentially.
In this model th total quantity demanded in the market is give by both firm 1 firm 2.
QD = Q1+Q2
So the price of Market = 20 - QD and the price for firm 1 = 20-Q2 and for firm 2 = 20 - Q1.
When cost for firm 2 is 16 to stop him entering into the market the quantity firm 1 should produce is Qd= 20-16= 4.
I fthe firm 2 is producing for 16$ then firm 1 should not deter him as he will be better well off to sell his product at 15$ as his cost is Zero.
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