Suppose Ralph sells bento lunches which have the following demand:
pR = 100 - qR - 0.5qD
where pR is the price of Ralph's bentos and qR is the number of bentos Ralph sells.qD is the number of bentos Ralph's rival Dave sells.Dave's demand is given by:
pR = 100 - qD - 0.5qR
where pD is the price Dave can sell his bentos for.Suppose each seller has a cost per unit (average and marginal)of $1.
a.How does this game differ from the Cournot model with identical products? Why do the demand curves indicate that the goods are differentiated - not perfect substitutes for one another?
b.Compute the best response functions for each seller and the Nash Equilibrium outputs and prices.

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The Answer of Suppose Ralph sells bento lunches which have the following demand:
pR = 100 - qR - 0.5qD
where pR is the price of Ralph's bentos and qR is the number of bentos Ralph sells.qD is the number of bentos Ralph's rival Dave sells.Dave's demand is given by:
pR = 100 - qD - 0.5qR
where pD is the price Dave can sell his bentos for.Suppose each seller has a cost per unit (average and marginal)of $1.
a.How does this game differ from the Cournot model with identical products? Why do the demand curves indicate that the goods are differentiated - not perfect substitutes for one another?
b.Compute the best response functions for each seller and the Nash Equilibrium outputs and prices.

Suppose Ralph Sells Bento Lunches Which Have the Following Demand