What would be solution to the bertrand price setting game

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Two firms in a duopolistic industry have constant and equal marginal costs c and face market demand schedule given by p k - q where k > c and q is total output.

1. What would be the solution to the Bertrand price setting game?

2. Compute the joint-profit maximising solution for this industry.

3. Consider an infinitely repeated game based on the Bertrand stage game when both firms have the discount factor o 1. What trigger strategy, based on punishment levels p c, will generate the outcome in part 2? For what values of o do these trigger strategies constitute a subgame perfect Nash equilibrium?

Reference no: EM13952777

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