Return to the Price Competition with Identical Products game of Section 6.2. Now assume that shop… 1 answer below »
Return to the Price Competition with Identical Products game of Section 6.2. Now assume that shop 2 has a cost of 15, while shop 1 still has a cost of 10. Make the (admittedly arbitrary) assumption that if both shops set the same price, then all shoppers buy from shop 1. Shop 1’s payoff function is
while shop 2’s payoff function is
Find all Nash equilibria.
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