Suppose Ralph sells bento lunches,which have the following demand:
p_R = 100 - q_R - 0.5q_D
where p_R is the price of Ralph's bentos and q_R is the number of bentos Ralph sells.q_D is the number of bentos Ralph's rival,Dave,sells.Dave's demand is given by:
p_R = 100 - q_D - 0.5q_R
where p_D 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: p_R = 100 - q_R - 0.5q_D where p_R is the price of Ralph's bentos and q_R is the number of bentos Ralph sells.q_D is the number of bentos Ralph's rival,Dave,sells.Dave's demand is given by: p_R = 100 - q_D - 0.5q_R where p_D 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