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Questions › DSE › DSE 2005 › Q11
2 marks, −1Microeconomics › Monopolistic competition and oligopoly › Stackelberg and sequential competitionHardabout 3 min

DSE 2005 Question 11: Monopolistic competition and oligopoly

For the Cournot duopoly with p=a−b(q1+q2)p=a-b(q_1+q_2)p=a−b(q1​+q2​), C1(q1)=q1C_1(q_1)=q_1C1​(q1​)=q1​ and C2(q2)=2q2C_2(q_2)=2q_2C2​(q2​)=2q2​: suppose, instead of choosing outputs simultaneously, Firm 111 chooses q1q_1q1​ first and Firm 222 chooses q2q_2q2​ after seeing q1q_1q1​. As a result of this change, compared to the Cournot outcome,

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For the Cournot duopoly with p=a-b(q₁+q₂), C₁(q₁)=q₁ and C₂(q₂)=2q₂: suppose, instead of choosing outputs simultaneously, Firm 1 chooses q₁ first and Firm 2 chooses q₂ after seeing q₁. As a result of this change, compared to the Cournot outcome, (A) q₁ will decrease and q₂ will increase (B) q₁ and q₂ will increase (C) q₁ will increase and q₂ will decrease (D) q₁ and q₂ will decrease

Also written as: For the Cournot duopoly with p=a-b(q_1+q_2), C_1(q_1)=q_1 and C_2(q_2)=2q_2: suppose, instead of choosing outputs simultaneously, Firm 1 chooses q_1 first and Firm 2 chooses q_2 after seeing q_1. As a result of this change, compared to the Cournot outcome,

Monopolistic competition and oligopoly has come up 104 times in 7 exams since 2004.

What this question tests

This question is on Stackelberg and sequential competition, part of Monopolistic competition and oligopoly in Microeconomics.

A leader moving first and a follower reacting, in quantities or prices.

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Practise Monopolistic competition and oligopolyMore on Stackelberg and sequential competition

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