17) Suppose the demand for Pepsi-Cola is qp = 50 - 2pp + 1pc. The firm faces a constant marginal cost of m, and pc denotes the price of Coca-Cola. Assuming Bertrand behavior, derive Pepsi-Cola's best-response function and explain how the firm changes price in response to changes in its own marginal cost and changes in Coca-Cola's price.
17) Suppose the demand for Pepsi-Cola is qp = 50 - 2pp + 1pc. The firm faces a constant marginal cost of m, and pc denotes the price of Coca-Cola. Assuming Bertrand behavior, derive Pepsi-Cola's best-response function and explain how the firm changes price in response to changes in its own marginal cost and changes in Coca-Cola's price.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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17) Suppose the demand for Pepsi-Cola is qp = 50 - 2pp + 1pc. The firm faces a constant marginal cost of m, and pc denotes the
18) In a Bertrand duopoly with product differentiation, explain how a change in one firm's marginal cost can have an effect on the price charged by the other firm.
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