In Kingston, a certain market is served by the firms Attila and Bando. They have constant average costs of $20 per unit. The firms can choose either a high price ($100) or a low price ($50) for their output. When both firms set a high price, total demand is 10,000 units which is split evenly between the two firms. When both set a low price, total demand is 18,000, which is again split evenly. If one firm sets a low price and the second a high price, the low priced firm sells 15,000 units while the high priced firm sells only 2,000 units. Analyze the pricing decisions of the two firms as a non-cooperative game.

In Kingston, a certain market is served by the firms Attila and Bando. They have constant average costs of $20 per unit. The firms can choose either a high price ($100) or a low price ($50) for their output. When both firms set a high price, total demand is 10,000 units which is split evenly between the two firms. When both set a low price, total demand is 18,000, which is again split evenly. If one firm sets a low price and the second a high price, the low priced firm sells 15,000 units while the high priced firm sells only 2,000 units. Analyze the pricing decisions of the two firms as a non-cooperative game.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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