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Gillette (firm 1) and Schick (firm 2) are the only two firms in the market for disposable razors

Economics

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Gillette (firm 1) and Schick (firm 2) are the only two firms in the market for disposable razors. The market inverse demand function for razors is P = 95 − q₁ − q₂. Each firm has constant marginal costs given by MC = 5, and zero fixed costs.Consider the case that Gillette (firm 1) operates as a (single-price) monopolist in the market. At its profit maximum the market-clearing price will be , and its profit will be Now suppose that Schick (firm 2) enters the market and chooses q2 to maximise its profit treating the output of firm 1 as given. Consider its best-response function. At q1 = 0 firm 2 will supply and for each one-unit increase in q? it will decrease its output by units.