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# Consider the market where there is product differentiation with two firms. The firms are choosing prices p1 and p2 and have demands given by q1 = 40…

Consider the market where there is product differentiation with two firms. The firms are choosing prices p1 and p2 and have demands given byq1 = 40 – 0.5 p1 + p2q2 = 60 – 2 p2 + p1Assuming zero marginal and zero fixed costs, we can get the best response function of firm1 and firm2. when we calculate the profits for each firm we can get the different amount of profits. Why do the firms get different profits? Don’t they have the same costs? Please explain.

Consider the market where there is product differentiation with two firms. The firms arechoosing prices p1 and p2 and have demands given byq1 = 40 – 0.5 p1 + p2q2 = 60 – 2 p2 + p1Assuming zero…

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