Consider the following Oligopoly market with two firms which produce a differentiated product and have the following demand functions. q1= 10 – P1 + (P2/2) q2 =10 – P2 + (P1/2) Total Fixed Costs to either firm is 10 dollars and there are no variable costs.
(1) Set up a normal form game (box game) which allows each firm (firm 1 and firm 2) to decide between setting the price derived in part (a) or the price derived in part (b). The payoffs to each firm should be the profit they would receive in each scenario