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Two firms compete via price competition in a market with

Differentiated Demand - Price Competition

Two firms compete via price competition in a market with differentiated products. The demand for Firm 1's good is Q1 = 600-4P1 + 3P2, while the demand for Firm 2's good is Q2 = 200-2P2 + P1. Firm 1 has costs C1(Q1) = 10Q1, while Firm 2 has costs C2(Q2) = 2(Q2)2.

(a) Solve for the best response functions for each rm.

(b) Solve for the Nash equilibrium of this game.

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Microeconomics: Two firms compete via price competition in a market with

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