Question: Consider a non-collusive duopoly model with both firms supplying bottled drinking water. The firms choose prices simultaneously. The marginal cost for each firm is $1.50.

Consider a non-collusive duopoly model with both firms supplying bottled drinking water. The firms choose prices simultaneously. The marginal cost for each firm is $1.50. The market demand is shown by the figure given below.
a. Find the demand functions for each of the firms.
b. What pricing strategy by each firm would be a Nash equilibrium in this model?

Price $4 Demand 2,000 Quantity

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