On top of that.
Assume that two firms, say firm 1 and firm 2 sell differentiated goods and face the following demand functions:
q1= 4/3 - 2/3a - 4/3p1 + 2/3
q2= 4/3a - 2/3 + 2/3p1 - 4/3p2
where a>1 . In addition assume that firms target own profit maximisation, compete(simultaneously) in quantities and have marginal costs equal to c1= c2=c. Assume that 1>c?0.
question) Derive each firms best response function. Are quantities strategic substitutes or complements?
