Problem 3: Cournot Model. The Knicks and the Nets are each building a new stadium and are trying to determine how many premium box seats to offer. The inverse demand for Knicks box seats is given by:

PK(qK,qN)=513qK qN The inverse demand for Nets box seats is given by:

PN(qN,qK)=513qN qK The Knicks and Nets choose quantities qK and qN of box seats simultaneously, and each team

is trying to maximize profits. The marginal cost of producing each box seat is MC = 9.

a) Find the Knicks marginal revenue curve. b) Find the best response function for each team.

c) Find the Nash equilibrium quantity of each team.

d) Find the equilibrium price and profit of each team.