Home / Questions / Differentiated product Bertrand. Suppose that firm Y produces yellow marbles and that firm...
Differentiated product Bertrand. Suppose that firm Y produces yellow marbles and that firm W produces white marbles. Further suppose that consumers' tastes are heterogeneous-some prefer yellow marbles while others prefer white ones. Firm-specific demands are given by: The subscripts y and w refer to yellow and white marbles, respectively (a) Suppose both firms have a marginal cost of $15/bag. What are the price and quantity sold (b) Now suppose that firm W has a marginal cost of only $10. What are the new prices and (c) If you are the owner of a firm that is at a comparative cost disadvantage and compete in a by both firms in the differentiated Nash-Bertrand equilibrium? quantities sold by both firms? Bertrand game, would you rather be in an industry with differentiated products or an industry with homogenous products? Why?
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