Find the best response function for each firm

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Two firms are located at opposite ends of a beach. The beach is 5 miles long. 600 consumers are uniformly located on the beach. Each consumer has a perfectly inelastic demand for two units of a good. To get the good, the consumer has to travel to the firm and back. The cost of travel is 0.30d (where d is total distance traveled in miles).

The two firms have identical cost functions, produce identical products, and have a constant MC of production of $2. Both firms can choose their own price.

(a) Find the best response function for each firm and solve for the Nash equilibrium prices for each firm

Reference no: EM13723640

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