A town has two pie stores, Anna and Beatrice. It costs each
store $11 to produce...
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Economics
A town has two pie stores, Anna and Beatrice. It costs eachstore $11 to produce a pie. Let P1 denote Anna's price and P2denote Beatrice's price per pie. Let Q1 and Q2 denote the demandfor each store's pies per day. The store's demands are givenby:
Q1 = 100- 4P1 + 2P2
Q2 = 100- 4P2 + 2P1
Assuming stores compete in price
1)Write the profit function for Anna’s in terms of eachstore's strategies.
Write the profit function for Beatrices in terms of eachstore's strategies.
2)Find the best response functions of each store.
3)Find the Nash Equilibrium of the game assuming firms chooseprices simultaneously.
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