Home / Questions / uppose that firms 1 and 2 operate under conditions of constant average and marginal cost b...
uppose that firms 1 and 2 operate under conditions of constant average and marginal cost but thatfirm 1’s marginal cost is c1=10 and firm 2’s is c2=8. Market demand is Q =500 -20P. a. Suppose firms practice Bertrand competition, that is, setting prices for their identical productssimultaneously. Compute the Nash equilibrium prices. (To avoid technical problems in thisquestion, assume that if firms charge equal prices then the low-cost firm makes all the sales.) Bertnard model is an Oligopoly model in which firms produce a homogeneous good, each firm treats the price of its competitors as fixed,and all firms decide simultaneously what price to charge The marginal cost is asymmetric here. C1>c2
May 15 2020 View more View Less
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