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# Duopolists share a market in which the market demand is P = 20 - Q, where Q = q1 + q2. The firms' cost functions are C1 = 4 + 6q1 and C2 = 3 + 4q2....

Duopolists share a market in which the market demand is P = 20 - Q, where Q = q1 + q2.

The firms' cost functions are C1 = 4 + 6q1 and C2 = 3 + 4q2.

a) Derive and graph each firm's reaction function.

b) In the Cournot equilibrium, what quantity will each firm produce? What price will each

firm charge?

c) In the Stackelberg equilibrium, what quantity will each firm produce? What price will

each firm charge? (You may assume that firm 1 makes its output decision first.)