Two firms are producing identical products ,and the marginal cost is fixed at MC= 20. The firms choose prices sequentially. Firm 1, the "leader", moves first and chooses pricep1. Firm 2, the "follower", observesp1and choosespricep2. There are 100 consumers. All of them will buy from the firm with lower price. If the prices are equal, 50 consumers buy from firm 1, and 50 consumers from firm 2. Assume that the prices are integers (that is, the price should be a whole number like 24 or 49 and can not be 49.99 or 67.5.)

(a) Ifp1= 50, what is follower's best reply?

(b) Specify follower's best reply for any value ofp1.

(c) Given the follower's best reply, what price should the leader set to maximize its payoff