Assume each firm can select two output strategies

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Two firms, A and B, have complete control of the supply of mineral water and both have zero costs. The market (inverse) demand function is given by: P = 200 – 10Q, where Q = qA (output of seller A) + qB (output of seller B). Their best reply functions (BRP) are given by: qA = 10 - .5qB qB = 10 - .5qA

c) Assume each firm can select two output strategies—specifically the strategies from parts (a) and (b). Denote these alternative output strategies qa and qb. Compute and payoff/profit matrix showing the four possible outcomes.

d) Does the game that you developed in preceding part have a determinate outcome—i.e., is there a dominant strategy? Explain.

Reference no: EM131007761

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