Derive each firms best response function. are the two firms, Ask an Expert

Economics

Suppose two firms produce differentiated goods and compete through prices. The demand for the good produced by firm i is

qi= Di(pi,pj)= 1-bpi-dpj
with 0?(pi,pj)= (pi-c)(1-bpi+dpj).

a) derive each firm's best response function. Are the two firms' actions strategic complements or substitutes?

b) Find the Bertrand equilibrium, and the equilibrium profit of each firm.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M941107

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