We conclude that the game has a unique Nash equilibrium, (t1*, t2*) = (4,6).
- Find the countries' best response functions. To find the best response function of country 1, solve
maxt1[t1(t1 t2 2)].
We find b1(t2) = (1/2)(t2 + 2). Similarly the best response function of country 2 is b2(t1) = (1/2)(t1 + 8).
- Solve for the Nash equilibria. A Nash equilibrium is a pair (t1*,t2*) such that t1* = b1(t2*) and t2* =
b2(t1*). These two equations have a unique solution, (t1, t2) = (4,6).