Suppose Ralph sells bento lunches, which have the following demand:pR = 100 – qR – 0.5qDwhere pR ...

a.   The output of the rival firm has a smaller effect on the demand for a firm's output than the
firm's own output. This means that customers view the goods as substitutes, but the "own-price effect" is stronger than the substitute's price effect. For example, the market price of coke is more responsive to the quantity of coke supplied than it is to the quantity of Pepsi supplied. In the traditional Cournot model, the goods are perfect substitutes and each firm's output had the same impact on the market prices. Here, it is possible for the goods to have different prices, but in Cournot's model, the goods are sold at the same price.
b.   The profit functions are
      πR = (100 - qR - 0.5qD)qR - qR
      πD = (100 - qD - 0.5qR)qD - qD
The best response functions are
      qR = (99 - 0.5qD)/2
      qD = (99 - 0.5qR)/2
Solving these simultaneously yields:
      qR = qD = 39.6
Each firm sells at the price 40.6.