1. Consider two firms producing hats, A and B. The demand functions are as follows:qĄ(Pa, PB) = 592 – 8pA + 4pB and qB (PA, PB) = 400 – 8pg + 4pAFirm 1 has constant marginal cost cprices, i.e. the game's joint strategy space is {(pa, PB) E R² | Pa > 0,Pp > 0}.10 per hat and firm 2 has c2 = 7. The firms decide on1.1. What is the nature of the relationship between the hats produced by A and the hatsproduced by B? [No calculations required.]1.2. Write down payoff functions for the two firms.1.3. Derive best-response functions for the two firms.

Demand measures the willingness and the ability of the individual to pay for the commodity. The…

1. Consider two firms producing hats, A and B. The demand functions are as follows: 9A (PAPB) = 592-8pд +4рB and B (PA, PB) = 400-8pB +4рA = 7. The firms decide on Firm 1 has constant marginal cost c₁ = 10 per hat and firm 2 has c₂ prices, i.e. the game's joint strategy space is {(PA, PB) Є R² | Pa≥0,Pb ≥ 0}. 1.1. What is the nature of the relationship between the hats produced by A and the hats produced by B? [No calculations required.] 1.2. Write down payoff functions for the two firms. 1.3. Derive best-response functions for the two firms.

1. Consider two firms producing hats, A and B. The demand functions are as follows: 9A (PAPB) = 592-8pд +4рB and B (PA, PB) = 400-8pB +4рA = 7. The firms decide on Firm 1 has constant marginal cost c₁ = 10 per hat and firm 2 has c₂ prices, i.e. the game's joint strategy space is {(PA, PB) Є R² | Pa≥0,Pb ≥ 0}. 1.1. What is the nature of the relationship between the hats produced by A and the hats produced by B? [No calculations required.] 1.2. Write down payoff functions for the two firms. 1.3. Derive best-response functions for the two firms.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Consider two firms producing hats, A and B. The demand functions are as follows:
qĄ(Pa, PB) = 592 – 8pA + 4pB and qB (PA, PB) = 400 – 8pg + 4pA
Firm 1 has constant marginal cost c
prices, i.e. the game's joint strategy space is {(pa, PB) E R² | Pa > 0,Pp > 0}.
10 per hat and firm 2 has c2 = 7. The firms decide on
1.1. What is the nature of the relationship between the hats produced by A and the hats
produced by B? [No calculations required.]
1.2. Write down payoff functions for the two firms.
1.3. Derive best-response functions for the two firms.

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