Suppose that there are two lemonade stands competing with one another via Bertrand (price) competition. There are 100potential customers who walk by the two stands each day. Each of these customers will buy lemonade from whichever stand ischeapest as long as the price is less than $1. If they charge the same price then the customer chooses randomly between thetwo. The marginal cost of lemonade is the $0.25 for both stands. Fixed Costs are equal to $5 for each stand. What is the Nashequilibrium price of lemonade?a. $0.25b. $1.00c. $0.30d. $0.35

Nash equilibrium strategy is the strategy from which no player has any incentive to deviate given…

Answered: Suppose that there are two lemonade…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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