Calculating market price and profit for a firm under stackelberg model.
Two firms produce seat covers; each firm has a cost function C(q) = 30q + 1.5q2, the market demand for these seat covers is P = 300 - 3Q, where Q = q1+q2
Assume firm 1 can set its output level before firm 2, how much firm 1 will produce? How much firm 2 will produce? Illustrate what is the market price, and what the profit for each firm, is firm 1 better off by choosing its output first explain why or why not?
This is a stackalberg model.