Nash equilibrium in price model of duopoly
In the price model duopoly, the firms 1 and 2 produce quantities d1 and d2 as a functions of their prices p1, p2.
In this case:
d1 = max {0; 5 - p1 + 3p2} and d2 = max {0; 10 - 2p1 + p2}.
The firms have no production cost and they choose the prices at the same time and
independent of what the other chooses.
Solve for the Nash equilibrium and write down the best response functions of the firms.
Homework Answers
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