Two firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by C; (qi) = 16q¡ . Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Could you help me with these questions? a) If Firm 1 chooses Pi price? = 32, Firm 2's best response is to set what b) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price? c) If Firm 1 chooses p₁ = 9, Firm 2's best response is a range of prices. What is the lowest price in this range?
Two firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest
Could you help me with these questions?
a) If Firm 1 chooses Pi price? = 32, Firm 2's best response is to set what
b) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price?
c) If Firm 1 chooses p₁ = 9, Firm 2's best response is a range of prices. What is the lowest price in this range?
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