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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

1 Question: Switching Costs
Consider two airlines, A and B, flying the same route and engaging in a single-period Cournot competition. Industry demand (the demand from the entire population of customers) is q=100-p, and each firm has a constant unit cost of 10(total cost is 10 times the quantity produced). Suppose in the past 50%(randomly determined) of the consumers had flown A and the other 50% flown B. Now each firm announces that it will offer a "frequent-flyer" discount of 10 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 qB=15. Firm A does not have such a constraint and is free to choose any qA.
For all qA15, find the market prices (before discounts)pA and pB for the two firms' products as a function of qA.
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