What price will both firms set in equilibrium

Reference no: EM133363816

Questions: Consider the following variant of the Spatial Bertrand Model: There is a line of unit length along which 300 consumers are uniformly distributed. There are two firms in this market located at the two endpoints of the line x = 0 and x = 1. Firm 1 is charging price p, for good 1 and firm 2 is charging a price p2 for good 2. Both firms have a constant marginal cost c = 10. Define a consumer's location x as her most preferred product. Each consumer is willing to pay $50 for their most preferred product. However, there is a disutility associated with purchasing a good that is not your most preferred. Specifically, for a consumer located at x, the disutility of purchasing good 1 is 15x and the disutility of purchasing good 2 it 15(1 - x)

a. Consider the consumer located at point x. What is the (net) utility that she gets from purchasing the good from firm 1? What is the (net) utility of purchasing from firm 2?

b. Where is the marginal consumer located? What is the demand for each firm?

c. How much profit does each firm make? Find each firm's best response function

d. What price will both firms set in equilibrium? How much profit is each firm making in equilibrium?

Reference no: EM133363816

Questions Cloud

Why some researchers use hp filter to estimate the inflation : WHY some researchers use HP filter to estimate the inflation target for non-IT countries? Please support your answer with references?

What are the main take-aways about the direction : How can I use proper notation, short informative variable names, indexed parameters, include controls in the equation below (controls should not be

What are the benefits of international trade : What are the benefits of international trade and how do countries gain from trade?

Discuss the patient symptoms and what tests are used : Discuss the patient's symptoms and what tests are used for diagnosing them (lab values/diagnostics) if they are diagnosed with acute uncomplicated

What price will both firms set in equilibrium : Consider the consumer located at point x. What is the (net) utility that she gets from purchasing the good from firm 1? What is the (net) utility of purchasing

Describe participants within the judicial process : Describe participants within the judicial process, including the judge, jury, prosecutor, and defense counseL Compare and contrast the relationships

What are the most effective strategies for improving : how do you expect the independent variable ( alcohol consumption) of interest to affect your dependent variable (changing in eating habits)? Explain.

What is your countries population, geography, climate : What is your countries population, geography, climate and location in the world? What are the religious beliefs of the country and does that impact consumer

What are the two coefficients in a linear regression model : What is the difference between a conditional and an unconditional expected value of a random variable? What is a regression function, and how does it relate

User Account

All Pages