Economic game theory problem

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Economic game theory problem: please help me. (Cournot Competition with Differentiated Products) Two firms, A and B, are in Cournot (quantity) competition making differentiated products. Each firm has zero fixed cost and a marginal cost of $10. The inverse demand functions for the two products are: PA = 110 − QA − 0.5QB and PB = 110 − QB − 0.5QA (a) (2pts) Express both firms’ profits as functions of only QA and QB. (b) (4pts) Find both firms’ best response functions. (c) (4pts) Find the Nash equilibrium. How much profit does each firm earn in equilibrium? (d) (6pts) To make a comparison, Suppose now the two products are identical and the common market price for both products is P = 110−QA −QB. Each firm’s costs stay the same. Find out the profit each firm makes in the new Nash equilibrium. Do firms make more money with differentiated products or identical products?

Reference no: EM131007387

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