jitenbhagwani

There are two sellers that offer pies, Steve and Laura. The inverse demand for pies is given by P-500 - 2(Qa +QOL). Steve 's cost function is C(Qa)-2Qa 2, and Laura's cost function is CL(QL)-2QL . Steve and Laura compete according to Cournot competition by choosing quantities simultaneouslv. a. Find Steve's reaction function. Find Laura's reaction function b. Solve the two equations from parts (a) and (b) to find the equilibrium quantities chosen by Steve and Laura. c. Show both reaction functions in one graph, plotting Steve's quantity on the horizontal axis and Laura's quantity on the vertical axis. Show the equilibrium point on the graph. d. Find the equilibrium price and the equilibrium profits for each of the two sellers e. Suppose instead of choosing quantities simultaneously, Steve choosing quantity first, and Laura second as in the Stackelberg model. Write down Steve's new profit function, taking into account the effect of his quantity on the quantity chosen by Laura f. Find equilibrium quantities chosen by Steve and Laura under Stackelberg competition. g. Find the price and equilibrium profits for each of the two pie sellers under Stackelberg competition.