Brand loyalty so market demand can be expressed

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Suppose there are two firms, Boors and Cudweiser, each selling identical-tasting nonalcoholic beer. Consumers of this beer have no brand loyalty so market demand can be expressed as P = 5 − .001(Qb + Qc). Boors’ marginal revenue function can be written MR = 5 − .001(2Qb + Qc) and symmetrically for Cudweiser. Boors operates with out-of-date technology and has constant cost of $2 per unit (MC = AC = 2), whereas Cudweiser has constant cost of $1 per unit. Assuming the firms behave as Cournot competitors, Boor’s best-response function is

a. Qb = 2,000 − .5Qc

b. Qb = 1,500 − .5Qc

c. Qc = 2,000 − .5Qb

d. Qc = 1,500 − .5Qb

Reference no: EM13984696

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