ppose a duopoly where two firms, 1 and 2, select their output q1 and q2 once and

independently of one another (i.e. non-co-operatively) in order to maximize their

respective profit. Assuming that (a) the price is set automatically by the market

according to the inverse demand function p = 1,000- q1- q2, and (b) Each firm has the

same fixed cost (F) and constant marginal cost equal to 10.

a. Represent the game in strategic and extended form

b. Show that there exists a pair of quantity strategies (q1, q2) which constitute this

game's a unique Nash equilibrium in pure (quantity) strategies.

c. Is this equilibrium a Pareto efficient allocation?