Consider the model of Bertrand competition with linear demand Q(p) = max[0, a – p) and with two- %3D firms, in which demand is split if the same price is set. Suppose linear demand with a = 8, and constant cost c = 3 per unit, suppose Firm 1 chooses price pi = 7 and firm 2 chooses price p2 = 6. Which of these prices p would be a profitable deviation from pi for Firm 1? 02 3 06 07 Suppose now a = 16, and constant cost c = 8 per unit, if p2 = 14, what is the best-response for Firm 1? 14

Consider the model of Bertrand competition with linear demand Q(p) = max[0, a – p) and with two- %3D firms, in which demand is split if the same price is set. Suppose linear demand with a = 8, and constant cost c = 3 per unit, suppose Firm 1 chooses price pi = 7 and firm 2 chooses price p2 = 6. Which of these prices p would be a profitable deviation from pi for Firm 1? 02 3 06 07 Suppose now a = 16, and constant cost c = 8 per unit, if p2 = 14, what is the best-response for Firm 1? 14

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

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