Question: (b) Suppose instead that Nash equilibrium prices were given by: where 1 a b < 1. Would an increase in a result in

(b) Suppose instead that Nash equilibrium prices were given by:

where 1 − a − b < 1. Would an increase in a result in an increase or softening of price competition? Would firm 2’s response be more or less aggressive than in part (4a)?

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