Problem
Consider two Bertrand competitors in the market for brie, François and Babette. The cheeses of François and Babette are differentiated, with the demand for François' cheese given by qF = 30 - pF + pB , where q F is the quantity François sells, pF is the price François charges, and p B is the price charged by Babette. The demand for Babette's cheese is similarly given as q B = 30 - pB + pF.
a. Find the Bertrand equilibrium prices and quantities for these two competitors.
b. Now consider a situation in which François sets his price first, and Babette responds. Follow procedures similar to those you used for Stackelberg quantity competition to solve for François' profit-maximizing price, quantity, and profit.
c. Solve for Babette's profit-maximizing price, quantity, and profit.
d. Was François' attempt to seize the firstmover advantage worthwhile?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.