Please assist me with the following:
Problem 1: Suppose that inverse demand is given by
D(Q) = 56 − 2Q, Q = q1 + q2
and the cost function is
TC(qi ) = 20qi + f
Find the Stackelberg equilibrium and compare it to the Cournot equilibrium.
Problem 2: Demand and costs are as given in the preceding question.
(a) Find the limit output for fixed costs (f) equal to 50, 32, 18, and 2.
(b) What is the SPNE for the entry game with the following timing: in the first-stage firm 1 can commit to its output; in the second stage firm 2 can enter and choose its output for fixed costs equal to 50, 32, 18, and 2?