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Unformatted text preview: ∂π 2 /∂ P 2 = (P 1 ) 3 [(P 24) (3P 24 ) + P 23 ] = 0 (2) (1) ⇒ [2(P 14)] / (P 1 3 ) + 1/P 1 2 = 0 or 2(P 14) + P 1 = 0 ⇒ P 1 = 8. (2) ⇒ [3(P 24)] / (P 2 4 ) + 1/P 2 3 = 0 or 3(P 24) + P 2 = 0 ⇒ P 2 = 6. Since, the first order conditions (1) and (2) imply that the prices are chosen independently of the other player's price, each must be a dominant strategy. We can also safely predict that these choices will be carried out by the players, and therefore, the outcome is (P 1 = 8, P 2 = 6)....
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This note was uploaded on 07/10/2011 for the course ECON 485 taught by Professor Eric during the Spring '11 term at Punjab Engineering College.
 Spring '11
 eric

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