Consider a Bertrand game between two firms. The demand for firm 1's product is given by q1 = 100-3p1 + 2p2. The demand for firm 2's product is given by q2 = 100 - 3p2 + 2p1. In terms of notation, pi is the price of firm 1's product and pa is the price of firm 2's product. The two firms choose their prices simultaneously. For your calculations below, assume zero costs and that prices are measured in dollars per unit. as Find the equilibrium prices. b Derive the firms' best-response functions and explain whether the prices are strategic substitutes or complements in this game.

Consider a Bertrand game between two firms. The demand for firm 1's product is given by q1 = 100-3p1 + 2p2. The demand for firm 2's product is given by q2 = 100 - 3p2 + 2p1. In terms of notation, pi is the price of firm 1's product and pa is the price of firm 2's product. The two firms choose their prices simultaneously. For your calculations below, assume zero costs and that prices are measured in dollars per unit. as Find the equilibrium prices. b Derive the firms' best-response functions and explain whether the prices are strategic substitutes or complements in this game.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

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