HW3 - Econ 419 Industrial Organization Jura Liaukonyte...

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Econ 419 – Industrial Organization Jura Liaukonyte Homework 3 Due Wed, March 21 st , in class Submit ONE version per study group. Write legibly. I reserve a right not to grade messy or illegible answers. Include a title page, listing the homework number and the names of all members of the study group. PART I – Analytical Problems 1. Two firms are Stackelberg competitors. The Stackelberg leader has the total cost function C 1 ( q ) = 12 q and the follower has the total cost function C 2 ( q ) = 16 q . The inverse demand curve for this market is P D ( Q ) = 64 - Q . a. Find the reaction function for the Stackelberg follower. b. How much output will the Stackelberg leader produce? c. How much output will the Stackelberg follower produce? d. Now suppose that the two firms are Cournot rather than Stackelberg competitors. i. Would the leader produce more or less output as a Cournot competitor? ii. Would the follower produce more or less output as a Cournot competitor? iii. Is the total Cournot output greater or less than the total Stackelberg output? iv. Draw reaction functions and show Cournot and Stackelberg equilibria on your graph.
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This note was uploaded on 04/30/2008 for the course ECON 419 taught by Professor Jura during the Spring '07 term at UVA.

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HW3 - Econ 419 Industrial Organization Jura Liaukonyte...

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