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lCocaCola and PepsiCo set prices simultaneously for a can of their respective colas. Let P1 2 0 denote the price set by CocaCola and 302

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lCocaCola and PepsiCo set prices simultaneously for a can of their respective colas. Let P1 2 0 denote the price set by CocaCola and 302 2 U the price set by PepsiCo. Consumers demand 6 - 3p; + 2312 billions of Coke cans and 6 3p; + 2331 billions of Pepsi cans. Assume that the cost of producing soda is D, so the payoff of CocaCola is 131 [6 3301 + 2m), and the payoff of PepsiCo is p2{6 3p; + 2101} {ignore the billion multiplier in the payoffs]. {a} 'What is the bestresponse p1 = BR1[p2} of CocaCola to a price 312 chosen by Pep siCo? (1)} Find the Nash equilibrium of this game. ((3} \"flush strategies are rationalizable (i.e., survive the process of iterated elimination of strategies that are not best responses for any surviving play of the opponent)

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