Assume that inverse demands in the home and foreign country are p=1-Q and p*=θ-Q, [θ>1]. Also, assume n=n* and 1>c=c*.
Question. Indicate the range of parameter values for which markets are segmented and determine the equilibrium prices when markets are connected by arbitrage. Also, determine prices when markets are connected. Assuming that the unit transportation cost is t and that the firms are Cournot rivals.