Two firms compete in emerging market for energy drinkscold

Reference no: EM13392959

Two firms compete in the emerging market for energy drinks/cold medicine hybrids that feature caffine, alcohol, and cough suppressant. Consider that the two firms compete as Cournot competitors. Firm 1 has production cost of c1(q1) = (q1)^2. Firm two is less efficient and has costs of c2(q2) = 2(q2)^2.

The inverse demand for the good is given by P(Q) = 440 - 2Q, where Q=q1 + q2.

a. What is the best response function of firm 1 (as a function of q2)?

b. What is the best response function of firm 2 (as a function of q1)? Remember that the two firms ARE NOT THE SAME.

Reference no: EM13392959

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