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1 Question: Switching Costs Consider two airlines, A and B , flying the same route and engaging in a single - period Cournot competition. Industry
Question: Switching Costs
Consider two airlines, A and B flying the same route and engaging in a singleperiod Cournot competition. Industry demand the demand from the entire population of customers is and each firm has a constant unit cost of total cost is times the quantity produced Suppose in the past randomly determined of the consumers had flown A and the other flown B Now each firm announces that it will offer a "frequentflyer" discount of to anyone who flew on its flight before.
Furthermore, suppose that firm B suffers an unexpected capacity constraint so that its quantity is fixed at a low level of Firm A does not have such a constraint and is free to choose any
For all find the market prices before discounts and for the two firms' products as a function of
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