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There are two firms (firm A and firm B). Both have marginal cost = 1. Demand is Q = 11 – P. The firms simultaneously set price. If they set the same price they split the market (Bertrand game). Derive the monopolist’s profit maximizing price and denote it P^M. Is both firms charging the price P^M a Nash Equilibrium? Show why or why not. If P^M is not the Nash Equilibrium, what is the Nash Equilibrium? Show why. If firm B had marginal cost = 6, what is the equilibrium?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M92198139

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