Suppose there are two firms operating in the same market and compete over prices. the firms sell a differentiated product and their demand is given by Firm 1's demand: -1.5 p,+p2+273 Firm 2's demand: 0.5 p,-1.5 p2+293 The firms' reaction function will be of the form p1=A1+a, p2 and p2=A2+a2P1 where A1= and a1= A2= and a2= Are prices Ostrategic complements Ostrategic substitutes What are the equilibrium prices in this market P1= and p2= What are the quantities demanded from each firm and q2= What are the profits for each firm TT= and t2=

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Suppose there are two firms operating in the same market and compete over prices. the firms
sell a differentiated product and their demand is given by
Firm 1's demand: -1.5 p,+p,+273
Firm 2's demand: 0.5 p,-1.5 p2+293
The firms' reaction function will be of the form p,=A¬+a¡ P2 and p2=A2+a2P1
where A1=
and a1=|
A2=
and a2=
Are prices
Ostrategic complements
Ostrategic substitutes
What are the equilibrium prices in this market
P1=
and p2=
What are the quantities demanded from each firm
q1=
and q2=
What are the profits for each firm
T1=
and 12=|
Transcribed Image Text:Suppose there are two firms operating in the same market and compete over prices. the firms sell a differentiated product and their demand is given by Firm 1's demand: -1.5 p,+p,+273 Firm 2's demand: 0.5 p,-1.5 p2+293 The firms' reaction function will be of the form p,=A¬+a¡ P2 and p2=A2+a2P1 where A1= and a1=| A2= and a2= Are prices Ostrategic complements Ostrategic substitutes What are the equilibrium prices in this market P1= and p2= What are the quantities demanded from each firm q1= and q2= What are the profits for each firm T1= and 12=|
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