Question
There are two firms (A and B) in a market that have marginal cost of zero, and they sell homogenous products. Inverse demand is P
There are two firms (A and B) in a market that have marginal cost of zero, and they sell homogenous products. Inverse demand is P = 200 Q where Q is total output. They compete by choosing outputs. a. What is firm A's best response function? b. What is the Nash equilibrium outcome (e.g. quantity, price, and profit)? c. Suppose that firm B gets to move before firm A. Solve for the output that firm B will choose. What will firm A choose? [Hint: for this question, firm B chooses qB accounting for the fact that firm A will choose the best response to whatever it chooses.]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started