There are two political groups who are pressuring a regulator to pass regulations that benefit them. If pressure of group 1 is p1, and pressure of group 2 is p2, group 1 gains p 2 1 p1(10 + p2), and group 2 gains p 2 2 p2(10 + xp1), where x represents deadweight loss.

(a) What is the best response function BR1 for group 1?

(b) What is the best response function BR2 for group 2 if x = 1? What if x = 0.5?

(c) What pair of pressures are chosen in equilibrium if x = 1? What if x = 0.5? Draw a graph illustrating your answer.

Hint. To calculate the best response function for group 1, take the derivate of group 1's gain with respect to p1 and set it equal to zero. You can calculate group 2's best response similarly