Duopolistic firms without cost compete on price with product differentiation. Demand for firm i is q₁ = 2 - 2p; + p;, where i is that individual firm and j is the other firm. a. Find the best response functions in the static game. (Be very careful since you'll keep using the best response functions.) b. Prices are nonnegative. Given this, do the first iteration of IESDS. c. Find the NE prices.
Duopolistic firms without cost compete on price with product differentiation. Demand for firm i is q₁ = 2 - 2p; + p;, where i is that individual firm and j is the other firm. a. Find the best response functions in the static game. (Be very careful since you'll keep using the best response functions.) b. Prices are nonnegative. Given this, do the first iteration of IESDS. c. Find the NE prices.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.4P
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