19.16. Price-matching guarantees.. In some industries firms offer price-matching guarantees (also known as meet-the-competition clauses): if some rival offers a price lower than firm i, then firm i is forced to offer the same price to all of its customers. Consider a price-setting, homogenous-product oligopoly and suppose that all firms have constant marginal cost c and offer the same price-matching guarantee. Specifically, firms simultaneously set prices (as in the Bertrand model); and if some firm sets a lower price than other firms, then all firms must match that price. Show that any price between cost and monopoly price can be obtained as the play of a Nash equilibrium.

19.16. Price-matching guarantees.. In some industries firms offer price-matching guarantees (also known as meet-the-competition clauses): if some rival offers a price lower than firm i, then firm i is forced to offer the same price to all of its customers. Consider a price-setting, homogenous-product oligopoly and suppose that all firms have constant marginal cost c and offer the same price-matching guarantee. Specifically, firms simultaneously set prices (as in the Bertrand model); and if some firm sets a lower price than other firms, then all firms must match that price. Show that any price between cost and monopoly price can be obtained as the play of a Nash equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Somehow Im having trouble with parts a-c. Could I have help understanding and solving giving this is a Bertrand duopoly model.
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