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Output is homogenous and the demand curve is P = 30 - Q.
There are two firms and production is constant returns to scale. Let the unit costs of firm 1 be c1 and the unit costs of firm2 be c2.
(a) Find expressions for the Cournot equilibrium firm outputs.
(b) Find expressions for the Stackelberg equilibrium firm outputs.
(c) Compare the efficiency of the Cournot and Stackelberg equilibria when c1 = 5 and c2 = 5.
(d) Compare the efficiency of the Cournot and Stackelberg equilibria when c1 = 8 and c2 = 5.
(e) Compare the efficiency of the Cournot and Stackelberg equilibria when c1 = 10 and c2 = 5.
(f) Provide an intuitive explanation for the efficiency rankings found in (c) through (e).
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