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Gillette (firm 1) and Schick (firm 2) are the only two firms in the market for disposable razors

Economics

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Gillette (firm 1) and Schick (firm 2) are the only two firms in the market for disposable razors. The market inverse demand function for razors is P = 95 − q1 − q2. Each firm has constant marginal costs given by MC = 5, and zero fixed costs.

In the equilibrium of a Cournot duopoly, each firm will supply an output of units, the market-clearing price will be and the profit of each firm will be Now suppose that Gillette (firm 1) is the Stackelberg leader, and that Schick (firm 2) is the follower. In Stackelberg equilibrium firm 1 will supply an output of units, firm 2 will supply , and the market-clearing price will be