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Consider a market served by two firms, firm 1 and firm 2. Suppose that the (inverse) demands for the two firms are given by: P1=1'q1'V42
Consider a market served by two firms, firm 1 and firm 2. Suppose that the (inverse) demands for the two firms are given by: P1=1'q1'V42 P2=1'QZ'YCI1 with ye(0,1). In addition, suppose that the two firms face the same constant marginal costs equal to 1>c>0. Suppose that both firms strategically choose prices to maximise own profits and firm 1 chooses its price before firm 2. Using the appropriate Mathematica commands: I Derive and describe the best response functions of the two firms I Derive and describe the prices, quantities and profits in equilibrium I Explain if firm 1 experiences a first mover advantage. Provide economic intuition
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