Assume Light Beer industry consists of two brands: Bud Light and
Miller Lite with identical costs C(q)=5q+q2/2, MC(q)=5+q. Consumers
view their products as identical. The market demand is:Q=125-p, The
firms can either “collude” or “compete.”
a) What are the best response functions of the two brands?
b) If both compete, they play Cournot and each produces qn.
Calculate the output, price and profits.
c) If both collude, they each produce qm (half the monopoly
output Qm).Calculate qm, pm and profits...