Hi, I am having a problem on the following question: Two firms compete in a mark

Question

Hi, I am having a problem on the following question: Two firms compete in a market to sell a homogeneous product with inverse demand function P = 400 - 2Q. Each firm produces at a constant marginal cost of $50 and has no fixed costs Find the cournot equilibrium output by two firms using 2-step procedure. Two step procedure: 1st step: Derive each firm's optimal decision based on its expectation on the other firm's action. Q1 = r1[E1(Q2)] Q2 = r2[E2(Q2)] 2nd step: apply the condition for cournot equilibrium and derive Q1* and Q2*. apply the equilibrium conditions, the reaction functions becomes Q1= r1(Q2)__(1) and Q2=r2(Q1)____(2) Solving equation (1) and (2) for Q1 and Q2, we get Q1* and Q2* Find the Stackelberg equilibrium using 2-step procedure: 1st step: Derive the follower's reaction function 2nd step: Based on the follower's reaction function, derive the leader's optimal decision

Explanation / Answer

FOLOW THIS The electrostatic force is directly proportional to the charge and inversely proportional to the square of the distance between the charges... let us take force between q1 and q as F1 and that between q2 and q be F2... now we want F1 =F2 so q1/square of r1 = q2/square of r2......where r1 and r2 are the distance of q from q1 and q2..... using this and r1+r2 = 2.43 m.....find out the distance

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