Identifying the nash equilibrium for bertrand

Reference no: EM1316112

Duopoly and Nash Equilibrium:

Two identical firms have MC = $3 and face a market demand function of: Q_D = 9 - P. there are no fixed costs.

a. Bertand: If the firms compete on the basis of (continuous) price, what is the Nash equilibrium if the game is played once? A finite number of times? Explain clearly.

b. If the Bertand game is indefinitely repeated, how can the firms sustain a cooperative Nash equilibrium? Calculate the temptation payoff and the value of δ*.

c. Stackelberg: If the firms compete on the basis of (continuous) quantity, what are the firms' reactive curve? Find the Nash equilibrium price and output and profit of the leader and the follower.

Reference no: EM1316112

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