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Question 2 Consider the following Bertrand game involving 2 firms producing differentiated products. Firms have no...

Question 2 Consider the following Bertrand game involving 2 firms producing differentiated products. Firms have no costs of production. Firm 1’s demand is q1 = 1-p1 + bp2, where b > 0. A symmetric equation holds for firm 2’s demand. a. Solve for the NE of the simultaneous price-choice game b. Compute the firms’ outputs and profits. c. Represent the equilibrium on a best-response function diagram. Show how an increase in b would change the equilibrium.

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