The demand curves for cases of Coke and Pepsi are given respectively by Qc(Pc. Pe) = 200 - 10pc + 5pe. Q-(Pc. Pe) = 200 – 10p, + 5pc- Each firm has a marginal cost of $10 per case and must simultaneously choose their prices. Are the following statements true or false? 6. If Pepsi charges less than Coke, then all customers will buy from Pepsi. 7. Because Coke and Pepsi are substitutes, the best model for understanding this market is the Cournot Competition Model. For the next question, note that Coke's revenue, as a function of price, is Re(Pc. Pp) = Pc(200 - 10pc + 5pp). 8. Solving the equation (Pc. Pr) = 10 apc for pc will yield Coke's best-response function. 9. The best-response functions are p(Pp) = 15 + 0.25 Pp and pi(Pc) = 15 + 0.25 Pc-
The demand curves for cases of Coke and Pepsi are given respectively by Qc(Pc. Pe) = 200 - 10pc + 5pe. Q-(Pc. Pe) = 200 – 10p, + 5pc- Each firm has a marginal cost of $10 per case and must simultaneously choose their prices. Are the following statements true or false? 6. If Pepsi charges less than Coke, then all customers will buy from Pepsi. 7. Because Coke and Pepsi are substitutes, the best model for understanding this market is the Cournot Competition Model. For the next question, note that Coke's revenue, as a function of price, is Re(Pc. Pp) = Pc(200 - 10pc + 5pp). 8. Solving the equation (Pc. Pr) = 10 apc for pc will yield Coke's best-response function. 9. The best-response functions are p(Pp) = 15 + 0.25 Pp and pi(Pc) = 15 + 0.25 Pc-
Chapter10: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 14SQ
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