Suppose there is a choice variable,x. The strategy available to players is to select a value ofx.

There are two players and the marginal benefit function each faces, is below:

• (Player 1)MB1= 140 - 3x1- x2
• (Player 2)MB2= 140 - x1- 3x2

The marginal cost (MC) of x for each player is 20. (Hint: each player will maximise their payoff when MB=MC).

First, identify each player'sbest response function.

The best response function for Player 1 is x1=.........-x2/........

The best response function for Player 2 is x2=.............-x1/........

Then, identify theNash Equilibrium.

In the Nash Equilibrium both players should select ............units ofxeach.