Allstate insurance and Aetna are fierce rivals in the insurance industry. The output of insurance policies...

Allstate insurance and Aetna are fierce rivals in the insurance industry. The output of insurance policies issued by Allstate is an important factor in Aetna's decision of how many policies to issue (the number of policies that maximize profits). Similarly, the output of insurance policies issued by Aetna is an important factor in Allstate's decision of how many policies to issue (the number of policies that maximize profits).

The reaction function for Allstate can be expressed as: Qallstate = 100-0.5(Qaetna). The reation function for Aetna is: Qaetna = 50 - 0.25(Qallstate).

A. graph both reaction functions. Be sure to indicate numerically the points at which each function intersects the horizontal and vertical axes.

B. At which output quanities do the reaction functions intersect?

Expert Solution

Rahul Sunny answered 2 years ago

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