MomCorp (M) and Planet Express, Inc

Subject:EconomicsPrice: Bought3

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MomCorp (M) and Planet Express, Inc. (E) are two firms that compete in a Cournot duopoly by simultaneously setting quantities (of package deliveries). Denote MomCorp's quantity by QM and Planet Express's quantity by QE. The package deliveries they offer are identical, so the price is determined in a combined market according to the inverse demand equation, P = 120 - Q, where Q = QM + QE. Suppose that MomCorp has constant marginal cost, MCM = 20, while Planet Express has constant marginal cost, MCg = 40. (6 points total) (a) Solve for the equilibrium quantities and the resulting price. (2 points) (b) Now suppose that MomCorp (M) can set their quantity before Planet Express (E). Explain which model of oligopoly is appropriate for this situation. Then solve for the equilibrium quantities and the price in this new model. (2 points) (c) Comparing parts (a) and (b), which model of competition does each firm prefer? Which model do consumers prefer? Explain your answers using intuition and /or additional calculations. (2 points) 12pt > Paragraph v BI U A & TV . ..