I have constructed a Bertrand game (competition in prices) and presented you with the reaction functions of each firm. P2 P1 = 12.5 + 4 Pi + 2 P2 2 Use excel to draw the reaction functions. Solve for the Nash equilibrium

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I have constructed a Bertrand game (competition in prices) and presented
you with the reaction functions of each firm.
P2
P1 = 12.5 +
4
P1
P2 ==
Use excel to draw the reaction functions.
Solve for the Nash equilibrium
+
n IN
Transcribed Image Text:I have constructed a Bertrand game (competition in prices) and presented you with the reaction functions of each firm. P2 P1 = 12.5 + 4 P1 P2 == Use excel to draw the reaction functions. Solve for the Nash equilibrium + n IN
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Step 1

Bertrand duopoly is where two firms simultaneously decide the prices and assume the other firm will not change the price of the good.

Firms have an incentive to reduce their price but this will leads to price competition in the market.

 

 

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