Compute the nash equilibrium and compare

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Suppose there are two goods. The demand for good 1 is q1=a-bp1+ep2and the demand for good two is q2=a-bp2+ep1.

a and b are strictly positive, |e|<b

(1)Compute the optimal prices, and the Lerner index and inverseelasticity of demand for each good.

(2)Now suppose the goods are produced by two firms that chooseprices simultaneously. Compute the Nash equilibrium

Reference no: EM13244672

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