Suppose the market of fried chicken is dominated by two

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Problem 4. Stackelberg Competition

Suppose the market of fried chicken is dominated by two oligopolists: Macdonald and KFC.

The inverse demand function is: P=20-Q.

Production cost of Macdonald is: 2Qm2.

Production cost of KFC is: Qk .

Suppose Macdonald is the first mover. Find the equilibrium of the Stackelberg game.

Hint

Economics The Stackelberg model is a strategic game used in economics. In this leadership model, the leader firm is the first to move and then the follower firm moves next. The players in this game are usually a leader and a follower. These two compete on quantity....

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