Two firms compete in a market with differentiated goods. If firms 1 and 2 choose quantities 91 and 92, respectively, then Firm i sells its output at price Pi = a - qi - αqj, where 1 ≥ a ≥ 0 and j ‡ i. Both firms produce with constant marginal cost c = [0, a). (a) Find all pure strategy Nash equilibria of the game in which the two firms simultaneously choose quantities.

Two firms compete in a market with differentiated goods. If firms 1 and 2 choose quantities 91 and 92, respectively, then Firm i sells its output at price Pi = a - qi - αqj, where 1 ≥ a ≥ 0 and j ‡ i. Both firms produce with constant marginal cost c = [0, a). (a) Find all pure strategy Nash equilibria of the game in which the two firms simultaneously choose quantities.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 9MC

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