Two firms are competing in a Bertrand setting. The demand and costs equations are: Q1 = 88–4P1+2P2, Q2 = 88–4P2+2P1; MC1 = 9; and MC2 = 10. Instructions: Use two decimal for part a. a. Determine the reaction function for each firm. Firm 1: P1 = + P2 Firm 2: P2 = + P1 Instructions: Use no decimals. Do not round values if used to complete other calculations. Use commas (30,000 instead of 30000) b. P1 = $ and P2 = $ c. Q1 = and Q2 = d. Profits Firm 1 = $ and profits Firm 2 = $ e. If Firm 1 instead produces P1 = 16, the optimal P2 = . f. When one of the firms set a P < P-Duopoly, the best strategy for the other firm is to set: A. a P-BRF, and continue with this strategy afterward with the risk of economic profits = 0. B. a P-BRF, and after this one time, then continue with P-Duopoly. C. a P > P-Duopoly from now on, until the market reaches P-Monopoly. D. also P < P-Duopoly one time, then set P-Monopoly
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Two firms are competing in a Bertrand setting. The demand and costs equations are: Q1 = 88–4P1+2P2, Q2 = 88–4P2+2P1; MC1 = 9; and MC2 = 10.
Instructions: Use two decimal for part a.
a. Determine the reaction function for each firm.
Firm 1: P1 = + P2Firm 2: P2 = + P1
Instructions: Use no decimals. Do not round values if used to complete other calculations. Use commas (30,000 instead of 30000)
b. P1 = $ and P2 = $
c. Q1 = and Q2 =
d. Profits Firm 1 = $ and profits Firm 2 = $
e. If Firm 1 instead produces P1 = 16, the optimal P2 = .
f. When one of the firms set a P < P-Duopoly, the best strategy for the other firm is to set:
A. a P-BRF, and continue with this strategy afterward with the risk of economic profits = 0.
B. a P-BRF, and after this one time, then continue with P-Duopoly.
C. a P > P-Duopoly from now on, until the market reaches P-
Monopoly .D. also P < P-Duopoly one time, then set P-Monopoly.
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