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b. What are the firms prices in a Nash equilibrium of Bertrands model?Consider the case of differentiated products. Suppose that firm 1 and firm 2
b. What are the firms prices in a Nash equilibrium of Bertrands model?Consider the case of differentiated products. Suppose that firm 1 and firm 2 produce product 1 and 2, respectively. Product 1s demand is Q1 = 10 P1 + P2. Product 2s demand is Q2 = 10 P2 + P1. The total cost function for firm 1 is TC1 = 5Q1 and for firm 2 is TC2 = 5Q2. The firms choose their prices simultaneously.
a. Indicate whether product 1 and 2 are substitutes or complements for each other.
b. What are the firms prices in a Nash equilibrium of Bertrands model?
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