Please answer the following question fully and in detail!
Consider a Bertrand duopoly with two firms 1,2 who sell the same good. The demand curve of the good is given by Q = 15 − p if p < 15 and Q = 0 if p ≥ 15. Both firms have the same constant unit cost 2.
Firms 1,2 set prices p1, p2. If firms set different prices, then the firm which sets the minimum price of the two, receives the demand at that price while its rival receives zero demand. If both firms set the same price, they equally split the demand at that price.
(a) Determine the profit functions of firms 1,2.
(b) Find best response of firm 2 to p1 = 7
(c) Find best response of firm 1 to p2 = 3
(d) Show that (p1 = 3, p2 = 3) is a Nash Equilibrium (NE) of the Bertrand duopoly.
(e) Show that (p1 = 6, p2 = 6 is a not an NE of the Bertrand duopoly.
Please answer the following question fully and in detail! Consider a Bertrand duopoly with two firms...
Please answer the following question fully and in detail! Consider a Bertrand duopoly with two firms 1,2 who sell the same good. The demand curve of the good is given by Q = 30 − p if p < 30 and Q = 0 if p ≥ 20. Both firms have the same constant unit cost 5. Firms 1,2 set prices p1, p2. If firms set different prices, then the firm which sets the minimum price of the two, receives...
1 (Bertrand Model with sequential move) Consider a Bertrand duopoly model with two firms, Fi and Fa selling two varieties of a product. The demand curve for Fi's product is 91 (pi,P2) = 10-Pl + 0.5p2: and the demand for F's product is where p is the price charged by F). Both firms have a constant marginal cost of (a) Write down the profits of F1 and F2 as a function of prices P1 and P2. You have b) Derive...
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consider the standard Bertrand model of price competition. There are two firms that produce a homogenous good with the same constant marginal cost of c. a) Suppose that the rule for splitting up cunsumers when the prices are equal assigns all consumers to firm1 when both firms charge the same price. show that (p1,p2) =(c,c) is a Nash equilibrium and that no other pair of prices is a Nash equilibrium. b) Now, we assume that the Bertrand game in part...
Consider a Bertrand duopoly in a market where demand is given by Q firm has constant marginal cost equal to 20 100 - P. Each (a) If the two firms formed a cartel, what would they do? How much profit would eaclh firm make? (6 marks) (b) Explain why the outcome in part (a) is not a Nash Equilibrium. Find the set of Nash Equilibria and explain why it/they constitute Nash equilibria. (6 marks) (c) Now suppose that instead of...
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4. Consider about a duopoly case: two firms compete by choosing prices for two differentiated goods. Their demand functions are Q1 = 20-P1+ P2 and Q2-20 + P1-P2, where Pi and P2 are the prices charged by each firm, respectively, and Qi and Q2 are the resulting demands. Fixed costs and marginal costs are both zero. (a) Suppose the two firms set their prices at the same time. Find the resulting Na equilibrium. What price will each firm charge, how...