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Unformatted text preview: . 5 ( α-c 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 ( α-2 q 1-q 2 ) To ﬁnd Firm 1’s best response ﬁnd the FOC: α-q 2-4 q 1 = which simpliﬁes to: q 1 * = α-q 2 4 Similarly, q 2 * = α-q 1 4 Solving the two equations with two unknowns, we get: q 1 * = q 2 * = α 5 2...
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This note was uploaded on 03/27/2012 for the course ECON 3600 taught by Professor Daniel during the Spring '12 term at Dalhousie.
- Spring '12
- Game Theory