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6. Two firms with differentiated products are competing in price. Firm A and B face the following demand curves: QA = 90 - 2PA +

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6. Two firms with differentiated products are competing in price. Firm A and B face the following demand curves: QA = 90 - 2PA + PB and QB = 140 - 2PB + PA respectively. Assume production is costless. a. Give equations for and graph each firm's reaction curve. (2) b. If both firms set their prices at the same time, what is the Nash equilibrium price a nd quantity for each firm? What is the profit? (3) c. Suppose A sets its price first and then B responds. What price and quantity does ea ch firm set now? (3) d. Compare the profits from part b and c. Is there a first mover advantage in price competition? (2)

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