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Microeconomics II
book

Microeconomics II

by D.N. Dwivedi
August 2011
Intermediate to advanced content levelIntermediate to advanced
368 pages
14h 51m
English
Pearson India
Content preview from Microeconomics II
122 Chapter 5
Since Q
B
=(90–Q
A
)/2, Eq. (5.10) may be written as
Q
Q
P
A
A
=
90
90
2
or
Q
A
= 45 (Q
A
/2) P
or
2Q
A
= 90 Q
A
2P (5.11)
Q
A
= 90 2P
us, by knowing B’s reaction function, rm A is able to determine its own demand function.
Following the prot maximization rule (under zero cost condition), rm A will x its output at 45 units
(=90/2), i.e., half of the total demand at zero price.
Now, if rm leading A produces 45 units and the follower rm B sticks to its own reaction function,
it will produce
Q
B
=
=
90 45
2
22 5. units.
(5.12)
us, the industry output will be
45 + 22.5 = 67.5.
Stackelberg’s model does not show the determination ...
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Publisher Resources

ISBN: 9788131797655