Firm 1 and firm 2 are the only producers of spring water in the market.

The market demand for spring water is given by P = 70 Q1 Q2 . Firm 1 and firm 2 compete by choosing quantities Q1 and Q2 respectively. Each firm has a marginal cost of 10 and no fixed cost.

(a) Find out firm 1's and firm 2's reaction functions.

(b) Suppose the two firms choose quantities simultaneously. What are the equilibrium price, quantities, and profits of the two firms in this market?

(c) Suppose only firm 1 has a chance to bribe the government and get the right to choose the quantity first, what is the maximum amount of money that firm 1 is willing to pay? If firm 1 gets to move first, what are the equilibrium quantities and profits of firm 1 and firm 2?