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P=200-Q, where Q=Qa+Qb. both firms have marginal costs of $20 and ac=mc. what is the eq...

P=200-Q, where Q=Qa+Qb. both firms have marginal costs of $20 and ac=mc. what is the eq price quantity anf profits for bertrand price comp and cartel?
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Answer #1

*In Bertrand model firms determine price simultaneously.When product is homogenous then each firm will charge price equal to marginal cost. (P=MC).

*This is because if one firm charges price greater than MC than competitors can reduce price slightly to get entire market.This is because products are perfect substitute.In this situation there will be no incentive for any firm to deviate from their pricing strategy. In that sense it is Nash Equilibrium.

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