same AC MC = given by Firms 1 and 2 face the === 30 but sell...

 

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same AC MC = given by Firms 1 and 2 face the === 30 but sell differentiated products. The demands for firms 1 and 2 are = D(P1 P2) 70-P1+ P = D2(P1, P2) 70-P2 + 3P1 The firms choose prices p and p2 simultaneously. a) For each firm, represent profits as a function of both prices p and p2. b) Find the best response function for each firm. c) Find the equilibrium price p* P = P2- d) Suppose instead that demands are: == D(P1, P2) 70-P1+2P2 = D2(P1, P2) 70-P2+2Pi Does this change reflect more or less product differentiation? Will this increase or decrease competition? What will happen to the equilibrium price? (You don't have to do any calculations for part d. Explain your answer to each question.) same AC MC = given by Firms 1 and 2 face the === 30 but sell differentiated products. The demands for firms 1 and 2 are = D(P1 P2) 70-P1+ P = D2(P1, P2) 70-P2 + 3P1 The firms choose prices p and p2 simultaneously. a) For each firm, represent profits as a function of both prices p and p2. b) Find the best response function for each firm. c) Find the equilibrium price p* P = P2- d) Suppose instead that demands are: == D(P1, P2) 70-P1+2P2 = D2(P1, P2) 70-P2+2Pi Does this change reflect more or less product differentiation? Will this increase or decrease competition? What will happen to the equilibrium price? (You don't have to do any calculations for part d. Explain your answer to each question.)