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3. Two phone service providers, Teleterica (T) and Colgafon (C), offer same quality internet access. The inverse demand is p = 140 2Q, where Q is the number of subscriptions and p the price charged to each customer. qT and qC are the number of customers served by Teleterica and Colgafon, respectively, where Q = qT + qC . Marginal costs are constant, cT = cC = 20. Suppose firms simultaneously compete in prices, pT , pC .

a) Determine the best response function for each firm.

b) Find equilibrium prices.