Consider two firms Firm 1 and Firm 2 producing a homogeneous good Q The output of the two firms is g...........

Economics-I Theory of Consumer’s Demand

Consider two firms - Firm 1 and Firm 2 -producing a homogeneous good Q. The output of the two firms is given by q₁ and q₂ respectively. The market inverse demand curve is given by P =A- bq, where A > 0, P is the price of the good and q = q₁ + q_2.

Suppose that there is no fixed cost and the average cost for each firm is c, $\infty$ > c > 0. Find the unique pure strategy Nash equilibrium of this game. (120 words) (10 Marks )