Consider a Stackelberg duopoly with the following inverse demand function: P = 100 ? 2Q1 ? 2Q2. The firms' marginal costs are identical and are given by MCi(Qi) = 2. Based on this information, the leader's reaction function is:
A. r1(Q2) = 24.5 ? 0.5Q2 and r1(Q2) = 24.5 ? 0.5Q1.
B. Q1 = 49 ? 0.5Q2 and Q2 = 49 ? 0.5Q1.
C. The Stackelberg leader does not react to the output decision of its rival.
D. r1(Q2) = 24.5 ? 0.5Q1 and r2(Q1) = 24.5 ? 0.5Q2.
Answer: C
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