Consider a Stackelberg duopoly with the following inverse demand function: P = 100 − 2Q₁ − 2Q₂.The firms' marginal costs are identical and are given by MC_i = 2.Based on this information,the Stackelberg leader's reaction function is: A) Q_L = 24.5 − 0.5Q_F. B) Q_L = 50 − 0.5Q_F. C) Q_L = 49 − 0.5Q_F. D) None of the preceding answers is correct.

Question

Quizplus · Accepted Answer

The provided inverse demand function and marginal cost information do not directly lead to any of the reaction functions listed in options A, B, or C without further calculations or corrections to the demand function notation. The correct reaction function would require solving the leader's profit maximization problem, taking into account the follower's response, which is not straightforwardly represented by any of the given options.

Consider a Stackelberg Duopoly with the Following Inverse Demand Function