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1)In class we determined the Nash equilibrium for Burton and K2. Now, suppose Burton launches an advertising campaign so that the demand for Burton snowboards
1)In class we determined the Nash equilibrium for Burton and K2. Now, suppose Burton launches an advertising campaign so that the demand for Burton snowboards rises to qK = 800 - 2pk + 0.5pB and demand for K2 boards falls to qK = 1,000 - 1.5pK + 0.5pB. Assume the marginal cost for each firm is still zero.
a. Derive each firm's reaction curve.
b.What happens to each firm's optimal price?
c.What happens to each firm's optimal output?
d.Draw the reaction curves in a diagram and indicate the equilibrium.
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