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3. Consider Whinston's (1990) tying model with independent products. Firm 1 is the monopolist in market A, with an inverse demand function PA(94) = a
3. Consider Whinston's (1990) tying model with independent products. Firm 1 is the monopolist in market A, with an inverse demand function PA(94) = a -94. In market B, firm 1 faces competition from firm 2, with an inverse demand function PB (9BI, 9B2) _ a -9BI - 9B2 . Firms 1 and 2 compete a la Cournot, that is, each firm chooses its output(s) simultaneously. Again, for simplicity, assume that there is no production cost. (1) Derive equilibrium profits when firm 1 does not engage in tying. That is, firm 1 chooses 94 and 981 separately. (2) Derive equilibrium profits when firm 1 ties its sales of A and B. That is, firm 1 chooses 94 and 981 under the constraint that 94 = 9BI
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