Answered: Two companies are offering picture…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Hand written solution is not allowed my dear.

Transcribed Image Text:Two companies are offering picture frames with the University logo online. Consumers are indifferent between the two, and will just purchase from the cheaper option. Costs to make and send the product are $20 per item (for both firms), and let's assume the stores are limited to charging either $25, $30 or $35 The demand is such that the consumers are willing to purchase Q (P) = 100 – 2P units, where P is the lowest of the two prices the firms charge (as only the lower price is relevant: the firm charging the higher price does not sell any units; while if they charge the same price, each sells half of the demanded quantity) Example: if each firm charges $25, then the quantity demanded will be Q (25) = 100 -2.25 = 50. Since they both charge the same price, each will sell 50/2=25 units: 9₁ 92 = 25. That means the profit of each irm will be II (25; 25) = = 25-25-20-25 = 125 Alternatively, if firm A charges $30, while firm B charges $35, then firm B will not sell any units, and firm A will sell (30)- 100-2.30 = 40 units by itself. That means its profit will be IIA (30, 35) = 30-40-20-40 = 400, while firm B will have a profit of 0 (since it sells no units). What is the Nash equilibrium of this game? O 25, 25 O 25, 30 35, 30 O25, 35 35, 25 O 30, 35 35, 35 O 30, 30 O 30, 25

Expert Solution

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions