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Unformatted text preview: . 5 ( αc 2 ) . To see why, draw out the best response curves for this situation. You will notice that Firm 1’s BR curve is completely below Firm 2’s BR curve, and thus the only place the BR curves intersect is where q 1 = 0. 3. Exercise 59.1 Solution : Firm 1’s proﬁts are: q 1 ( α2 q 1q 2 ) To ﬁnd Firm 1’s best response ﬁnd the FOC: αq 24 q 1 = which simpliﬁes to: q 1 * = αq 2 4 Similarly, q 2 * = αq 1 4 Solving the two equations with two unknowns, we get: q 1 * = q 2 * = α 5 2...
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 Spring '12
 daniel
 Game Theory, best response, pure strategy, strategic form game, q2 rises

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