Suppose two firms with differentiated products are competing on price. The reaction curve for Firm 1 is P1 = 4 + 0.5 P2, and the reaction curve for Firm 2 is P2 = 4 + 0.5P1. What is the equilibrium price outcome in this market?
A) P1 = P2 = 4
B) P1 = P2 = 6
C) P1 = P2 = 8
D) P1 = 6 and P2 = 8
C
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