Imagine two firms that have the same constant marginal cost c and no fixed costs, compete by simultaneously choosing their prices and then produce enough to satisfy the demand they receive. Which of the following condition(s) is(are) needed so that there is a unique Nash equilibrium in which both firms choose P = c?
1. Firms have large capacities: an individual firm can produce enough output to satisfy the entire market demand at P = c.
2. Firms produce an identical product.
O We need neither 1 nor 2.
O We need 1 but not 2
O We need both 1 and 2
O We need 2 but not 1
