Question: please explain step by step, thank you. Now consider a Betrand price competition market with differentiated products. Suppose demand for good 1 is Q1 =

please explain step by step, thank you.

please explain step by step, thank you. Now consider a Betrand price

Now consider a Betrand price competition market with differentiated products. Suppose demand for good 1 is Q1 = a bPl + szand demand for good 2 is (22 = a bPz + dPl. Firm 1 has costs C ((21) = 30% and Firm 2 has costs C2 (Q2) = 3Q; a. Do these demands suggest that Firm 1's and Firm 2's products are substitutes from consumers' perspectives? Explain. b. Assuming Firm 1 and Firm 2 compete in the prices they charge, derive the reaction functions for each rm in terms of the market parameters a, b, d, and c. c. Describe how you would solve for the Bertrand-Nash equilibrium. i. Show all steps in your analysis, including 1. Firm prot function. 2. Firm rst-order condition 3. Firm best-response function d. Use your results from part (b) to solve for the specific equilibrium when a = 18, b = 2, d = 1, and c1 = c2 = 0. What are prices, outputs, and rm profits

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