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What is the nash equilibrium price of lemonade

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Reference no: EM131457139

Suppose that there are two lemonade stands competing with one another via Bertrand (price) competition. There are 100 potential customers who walk by the two stands each day. Each of these customers will buy lemonade from whichever stand is cheapest as long as the price is less than $1. If they charge the same price then the customer chooses randomly between the two. The marginal cost of lemonade is the $0.25 for both stands. Fixed Costs are equal to $5 for each stand. What is the Nash equilibrium price of lemonade?

a. $0.25
b. $0.35
c. $0.30
d. $1.00

Reference no: EM131457139

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