Consider a duopoly with homogeneous goods. Assume that inverse demand in that market is given by: = . Also, assume that total costs are given by 1 = 11 + 1 and 2 = 22 + 2.

Examine this market assuming firms are playing a price setting game. (i) Determine the Bertrand -Nash equilibrium in the market. (3 marks) (ii) Illustrate the reaction functions for each firm. (2 marks)