Consider differentiated bertrand model

Assignment Help Business Economics

Reference no: EM131379242

Differentiated Bertrand. Consider a Differentiated Bertrand model in which demand is given by q1 = 100 – p1 + p2 and q2 = 100 – p2 + p1 for firm 1 and firm 2 respectively and where both firms faced zero fixed costs and constant marginal cost = c.

a) Suppose that firms choose prices simultaneously. Solve for the Nash equilibrium (i) price (ii) output and (iii) profits of each firm as functions of c.

b) Now suppose that firm 1 chooses price first and then firm 2 chooses price taking firm 1’s price as given. Solve for the Sub-game Perfect Nash equilibrium (i) price (ii) output and (iii) profits of each firm as functions of c.

c) Use reaction functions to explain why making firm 1 a first mover results in both firm 1 and firm 2 raising price.

Reference no: EM131379242

Questions Cloud

What is the rule of reason test in antitrust law : In relation to antitrust law, what is significant about the Supreme Court's ruling that the NFL is not a single entity? Explain.- What is the rule-of-reason test in antitrust law and how is it carried out? Explain.

Determine the possible circumstances : Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances.

Define the laws that are applicable to this analysis : Define the laws that are applicable to this analysis and how it applies. How would your state (California) handle this issue? For help see Milliken v. Jacono, 2012 PA Super 284, 60 A.3d 133, 138 (Pa. Super. Ct. 2012)

What brief argument does stigler offer for his position : What brief argument does Stigler offer for his position in favor of government intervention in the economy? - What is the major objection that Coase has for opposing government intervention into the economy?

Consider differentiated bertrand model : Differentiated Bertrand. Consider a Differentiated Bertrand model in which demand is given by q1 = 100 – p1 + p2 and q2 = 100 – p2 + p1 for firm 1 and firm 2 respectively and where both firms faced zero fixed costs and constant marginal cost = c. Sup..

Describe what kinds of white collar crimes may have : Describe what kinds of white collar crimes may have contributed to the subprime mortgage mess that led to the financial meltdown of 2008

What is the source of state power to regulate business : How did the federal government's power to regulate business develop?- What is the source of state power to regulate business?

Create a defense to the lawsuit : Now suppose the linen company breached the contract, instead of the hotel. Does the Statute of Frauds create a defense to the lawsuit? Why or why not

What are the various techniques of corporate expansion : What are the general provisions of the Post-Sherman antitrust laws?- What are the various techniques of corporate expansion?

User Account

All Pages