Consider a Bertrand model, the pricing competition model. The market demand is P=200-Q. Consumers only buy from the firm charging the lower price. If the two firms charge the same price, they share the market equally. The marginal cost for firm 1 is 50, and the marginal cost for firm 2 is also 50. There is no fixed cost.
If firm 2 charges p2=130, then what price p1 will be firm 1’s best response
Get Answers For Free
Most questions answered within 1 hours.