Firms compete on price rather than quantity

Assignment Help Business Economics

Reference no: EM133636510

Question

Continuing with the advertising model, suppose the firms compete on price rather than quantity. That is, quantity demanded is given by @ = a, p, where p is the price consumers face. After firm I's selection of the level of advertising, the firms simultaneously and independently select pricesp, and p,- The firm with the lowest price obtains all of the market demand at this price. If the firms charge the same price, then the market demand is split equally between them. (To refresh your memory of the price-competition model, review the analysis of Bertrand competition in Chapter 10.) Find the subgame perfect equilibrium of this game and explain why firm I advertises at the level that you compute.

Reference no: EM133636510

Questions Cloud

Explain overall logic in organization of your concept map : Explain the overall logic in the organization of your concept map describing in more detail the relationship between concepts (nodes).

Consistent with efficient market hypothesis : Do you think the financial crisis was consistent with the Efficient Market Hypothesis? Yes or No? Why or why not?

Write a code of conduct about using ai technologies : You have been employed as a Data Ethics Officer by a financial services board (professional body). The board asked you to write a Code of Conduct

Provide an example of effective research communication : Provide an example of effective research communication. Be clear on the general purpose of the communication and how veracity (truthfulness) is maintained.

Firms compete on price rather than quantity : Continuing with the advertising model, suppose the firms compete on price rather than quantity.

Identify failure points that occurred throughout the project : Analyze current financial state using cost estimating techniques. Identify failure points that occurred throughout the project.

Make money from making risky investments in loans : How does the bank make a profit? A bank can make money from making risky investments in loans.

How would be the demand and supply curve : How would be the demand and supply curve moves if the Horizontal axis is Quantity of Won and Euro/Won for the Vertical axis.

What are the greatest economic challenges : What are the greatest economic challenges facing the United States today? What economic policies would best alleviate the problems causes by these challenges?

User Account

All Pages