Suppose that Jerry and Teddy are the only two sellers of designer umbrellas, which consumers view as differentiated products. For simplicity, assume each seller has a constant marginal cost equal to zero. When Jerry charges a price pJ and Teddy charges pT, consumers would buy a total of

umbrellas from Jerry. In similar fashion, Teddy faces a demand curve of

Illustrate each seller's best-response function on a graph. What are the equilibrium prices? How much profit does each seller earn?

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100-3P7 + PT 00-37 +