Re: ISI 2015 PEB Sample Question 4

Posted by onionknight on Apr 11, 2015; 4:13pm
URL: http://discussion-forum.276.s1.nabble.com/ISI-2015-PEB-Sample-Question-4-tp7596063p7596129.html

Yes and thanks for pointing that. However, the condition for attaining equilibrium with either firms producing positive quantities would still remain the same. If you look at the graph at the bottom, the only error is that the discontinuity, which shouldn't ideally be there and at Q2=A1/B12, the graph of Q1 should touch the Y axis (and likewise for Q2, it should touch the x axis at Q1=A1/2B11) . If by the "second curve", you mean the best response curve of firm 2, then as illustrated in the graph on the top (even after making the correction you pointed out), the second curve could be steeper than the first and there could still be a nash equilibrium on one of the axis(which would mean one firm produces 0)