Two ?rms, Alpha Vineyard and Beta Winery, produce and sell wine. The demand for Alpha's wine is given by the equation,
QA = 200-PA + PB.
In this equation, the price of Alpha's wine is PA per bottle, and the price of Beta's wine is PB per bottle. Alpha Vineyard has a marginal cost of MCA = $20 per bottle, and a ?xed cost of FCA = $6000. The demand for Beta's wine is given by the equation,
QB = 9000-100PB + 40PA.
Beta Winery has a marginal cost of MCB = $10 per bottle, and a ?xed cost of FCB = $10,000. The two ?rms compete by simultaneously selecting prices.
Q1. Are the bottles of wine produced by Alpha Vineyard and Beta Winery, homogeneous products or heterogeneous products? Your answer must reference the two ?rms' demand functions.
Q2. Find Alpha Vineyard's best-response function.
Q3. Find Beta Winery's best-response function.