1.3. Incomplete information. There are two firms competing on price. They sell different commodities, so their demands are D₁ (P1, P2) = 10 - 2p₁ + ¹/2p2 D₂(P1, P2) = 13+ p1 - 3p2. They move simultaneously. Both produce the commodity with linear cost functions. Firm 1 has marginal cost 2. This is known to both firms. Firm 2 can be of two types:

1.3. Incomplete information. There are two firms competing on price. They sell different commodities, so their demands are D₁ (P1, P2) = 10 - 2p₁ + ¹/2p2 D₂(P1, P2) = 13+ p1 - 3p2. They move simultaneously. Both produce the commodity with linear cost functions. Firm 1 has marginal cost 2. This is known to both firms. Firm 2 can be of two types:

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

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