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Consider the following game theory model of competition between two firms, firm 1 and firm 2, producing the same good, e.g, widgets. Each firm chooses
Consider the following game theory model of competition between two firms, firm 1 and firm 2, producing the same good, e.g, widgets.
Each firm chooses its own output taking as given the output of its rival.If firm 1 produces q1 units and firm 2 produces q2 units, then the price of good will be p = 208-5q, where q =q1 +q2 .
Find the Nash equilibrium of this game assuming the cost function of firm 1 is
C1(q1 ) = 7q12
and the cost function of firm 2 is
C2(q2 ) = 7q22
Then enter below the best response of firm 1 to firm 2 producing q2 = 13 units.
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