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1. Two cruise lines, FancyCruise and SuperCruise, are thinking about entering a new market - cruises to the Arctic. They anticipate that demand for a cruise will be 150 - P/10. The firms have the identical cost structures, where c(q) = 500q + 2000. FancyCruise manages to launch its ship first and so acts as a Stackelberg leader. What will be the equilibrium price and quantity per firm, and profit per firm?
a) Compute price, total quantity, and quantity per firm under Stackelberg.
b) Compare the profit for each firm. Would you rather be the leader or the follower?
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