Two airlines compete in prices. The can differentiate the product so that their respective demand functions look
Fantastic news! We've Found the answer you've been seeking!
Question:
Two airlines compete in prices. The can differentiate the product so that their respective demand functions look like
Qa=4000-25Pa+12Pb
Qb=3000-20PPa
AVCa=MCa=160
AVCb=MCb=180
profit functions are
a(Pa,Pb)=(Pa-160)(4000-25Pa+12Pb)
b(Pa,Pb)=(Pb-180)(3000-20Pb-10Pa
Reaction functions are
Pa=160+(6/25)Pb
Pb=165+(1/4)Pa
(2 points) Use this information to draw each firms reaction function. (Hint: let pA be on the horizontal axis and pB in the vertical axis) | |||||||||||||
(3 points) Find the Nash equilibrium choice of prices. |
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date: