There are two firms in the market. Denote the price and the quantity of firm j by p¡ and q; , respectively. Those two products are differentiated and the demand system is given by 91 = 100 – 2p1 + P2. 92 = 100 + p1 – 2p2 For simplicity, assume zero production costs, meaning that profit is equal to revenue. Consider the two-stage game in which firm 1 decides the price first and then firm 2 choose its price after observing firm 1's price. If firm 1's price is 24, what is the best response price of firm 2? Report only the value . Answer:

There are two firms in the market. Denote the price and the quantity of firm j by p¡ and q; , respectively. Those two products are differentiated and the demand system is given by 91 = 100 – 2p1 + P2. 92 = 100 + p1 – 2p2 For simplicity, assume zero production costs, meaning that profit is equal to revenue. Consider the two-stage game in which firm 1 decides the price first and then firm 2 choose its price after observing firm 1's price. If firm 1's price is 24, what is the best response price of firm 2? Report only the value . Answer:

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 9MC

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