1. Consider a homogeneous-good Bertrand model with 2 rms; lets call them Firm A and Firm B. The market demand is Q = 10 P . Firm A has a constant marginal cost of 3, whereas Firm B has a constant marginal cost of 4. Both rms do not face any capacity constraint.

The two rms choose their respective prices pA and pB simultaneously. Whichever rm charges a lower price grabs the whole market demand. If there is a tie, all consumers buy from Firm A. What is/are the Nash equilibrium(s) of this pricing game? Explain.