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## Homework Statement

Two retailers compete on price in a market. Firm 1’s demand depends on both its own price and firm 2’s price as follows: q1 = b – p1 + ap2. Similarly, firm 2’s demand depends on its own price and firm 1’s price: q2 = b – p2 + ap1. Their marginal costs of producing one unit of product are both c.

a. Find the expression of firm 1’s equilibrium price (as a function of a, b and c).

b. Find the expression of firm 1’s equilibrium profit (as a function of a, b and c).

## Homework Equations

## The Attempt at a Solution

I can't seem to figure this out as normally the price function would be given....

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