Bertrand Price Competition Consider the following normal demand equations (Q1 and 02) for the only two rms in a market, in which quantity demanded for each rm's product is a function of the rm's own price as well as the price of the other firm (thus, the market is a duopoly with differentiated products): I Firm1: Q1=108-3P1+P2 ' Firm 2: Q2 = 90 - 2P2 + 2P1 The firms have identical cost functions, given by: TC = 150x, where X is equal to 1 for Firm 1 and equal to 2 for Firm 2. Use this information to answer the questions (a. and b.) below. Il a. What is the price reaction function for each firm? NOTE: Complete the expression for each reaction function by specifying (in the respective box] the constant term and the slope value associated with the other firm's price. NOTE: Round every answer [constant and slope values) to two decimal places (Le. two places to the right of the decimal). Constant le a Value P1 = E + E x P2 P2 = E + E x P1 b. What is the equilibrium rice for each firm? Game Theory se the only two cruise lines serving a particular area of the Caribbean are each considering: offering more annual trips (cruises), buying more ships, or foregoing any kind of sion (i.e. Do Nothing). Currently, each company earns the same annual profit, $18 million ($18M). atrix below shows potential future annual profits of the cruise-line companies, depending on the action (i.e. strategy) each company chooses. e matrix to answer the questions (a. through d.) below. Assume, initially (questions a. through c.), the companies make their decisions simultaneously. In the last question e companies make their decisions sequentially (see details below). Cruise Liner 2 (CL2) Do Nothing More Trips More Shins CL1: $18M CL1: $13.6M CL1: $12.1M Do Nothing CL2: $18M CL2: $21.9M CL2: $19.6M CL1: $2 CL1: $14.6M CL1: $11.6M Cruise Liner 1 (CL1) More Trips CL2: $13.6M CL2: $14.6M CL2: $11.0M CL1: $19.6M CL1: $11.0M CL1: $10.2M More Ships CL2: $12.1M CL2: $11.6M CL2: $10.2M he boxes below, enter any dominated strategies for each company. Put "none" if a company does not have a dominated strategy. he boxes below, enter any dominant strategies for each company. Put "none" if a company does not have a dominant strategy. at is the Nash equilibrium? uppose CL2 were able to make its decision before CL1, so that CL1 made its decision after observing the strategy chosen by CL2. er these conditions. what would be the Nash equilibrium