Assignment:
Two competitors compete on quantity simultaneously in a market where demand is described by
P = 32 - 0.3Q. Firm 1 has production costs C1(Q1) = 7 + 4Q1 + 0.2Q12, and firm 2 has production costs of C2(Q2) = 6 + 3Q2 + 0.1Q22. Assume that firm 1 gains a timing advantage, and gets to be the leader.
Find the Stackelberg equilibrium with this price leadership.