You represent Firm 1 and compete against Firm 2 selling a ho…
You represent Firm 1 and compete against Firm 2 selling a homogeneous product. The demand curve your products face is 102-Q=P, where Q = q1 + q2. Your firm has a cost advantage: MC1 = 10 and MC2 = 14. Firm 1 and Firm 2 must choose quantities simultaneously. Through repeated play, you have identified Firm 2’s reaction function as: q2 = 44 – 1/2q1. Please identify Firm 1’s reaction function, q1, q2, and P.
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