Question
Two firms offer two goods of differentiated quality, and they compete in prices. Specifically, firm 1 offers good 1, which has high quality q1=20 ,
Two firms offer two goods of differentiated quality, and they compete in prices. Specifically, firm 1 offers good 1, which has high quality q1=20 , while Firm 2 offers good 2, which has low quality q2=10 . There is a continuum of consumers with taste for quality , uniformly distributed between 0 and 1, 0 1. Each consumer chooses between good 1 and good 2. If a consumer with parameter chooses good 1, she has utility q1* - p1, where p1 is the price of good 1. If instead the consumer chooses good 2, she has utility equal to q2* - p2.
If p1=8 and p2=1. How many consumers will buy good 1?
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