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19. Two firms which operate in the car industry, have to decide the quantities they will produce. Each of them knows the market demand
19. Two firms which operate in the car industry, have to decide the quantities they will produce. Each of them knows the market demand for its product but does not know the amount its rival will produce. Let us assume that total cost for each firm is c(qi) 10 + 2q; and that aggregate demand is (91 +92) = 320-2(91 + 92). = (a) What are the strategies of each firm? Since firms want to maximize profits, what are their payoffs? Which are the best-response functions? (b) What is the Nash equilibrium if both firms choose their quantities simultaneously?
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