Find the nash equilibrium and profit for each firm

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Reference no: EM133401512

Case Study: Consolidated Pie sells fruit pies wholesale to restaurants in the St. Louis market. Recently a new company, Benfield Gourmet pies entered the market in hopes of claiming a sizeable piece (pun intended) of the higher end restaurant pie market. Following the new entry, Consolidated earns net revenue per customer of (Pc-2) and has a demand function of Qc=100-4Pc+PB. Benfield's higher quality ingredients come at a higher cost leaving Benfield with a net revenue per customer of (PB-3). Benfield's demand function is QB=21-PB+Pc.

A. Basing your answer on the demand equations only, indicate whether Consolidated and Benfield's products are substitutes or complements. Explain your answer.

B. Write each firm's profit function in terms of the prices Pc and PB and solve for each firm's best response function.

C. Find the Nash Equilibrium and profit for each firm.

Reference no: EM133401512

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