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QUESTION

Can somebody help me to answer question 119.1?

Can somebody help me to answer question 119.1? I do not understand what happens when you do the cournot method with differentiated products. And how can I read out of an equation whether goods are substitutes, imperfect substitutes or compliments?

Suppose Ralph sells bento lunches which have the following demand:

pr=100-qr -0.5qd

where pr is the price of Ralph's bentos and qd is the number of bentos Ralph sells is the number of bentos Ralph's rival Dave sells. Dave's demand is given by:

pd=100-qd- 0.5qr

where pd is the price Dave can sell his bentos for. Suppose each seller has a cost per unit (average and marginal) of $1.

119.1.How does this game differ from the Cournot model with identical products? Why do the demand

curves indicate that the goods are differentiated -not perfect substitutes for one another?

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