00:01
So here, in our competition, firms compete by selling prices for products at the same time.
00:08
Since firm 2 has a larger marginal cost, c2 is equal to 8, and for firm 1, i'm going to say that c1 is equal to 10.
00:20
Firm 2 can always undercut firm 1's price and still make a profit.
00:24
Therefore, our nash equilibrium price for firm 1 is going to be p1 is equal to c1, which is equal to 10.
00:33
And for firm 2, it's going to be p2, which is equal to 10 minus some variable x, where x is a very small positive number.
00:47
For b, at these prices, consumers will buy firm 2 since it's a lower price.
00:55
To find our quantity demanded, we can use our equation q is equal to 500 minus 20p.
01:03
I'm going to plug in my p2 into this equation, and we're going to get approximately 300.
01:12
Since all consumers buy from firm 2, our output then is going to be that q1 is equal to 0, and q2 is equal to 300...