wo firms produce a homogeneous good and compete in price. Prices can only take integer values. The demand curve is Q = 6 p, where p denotes the lower of the two prices. The lower - priced firm meets all the market demand. If the two firms post the same price p, each one gets half the market demand at that price, i. e., each gets (6p)/2. Production cost is zero.a) Show that the best response to your rival posting a price of 6 is to post the monopoly price of 3. What is the best response against a rival's price of 4? of 5?
wo firms produce a homogeneous good and compete in price. Prices can only take integer values. The demand curve is Q = 6 p, where p denotes the lower of the two prices. The lower - priced firm meets all the market demand. If the two firms post the same price p, each one gets half the market demand at that price, i. e., each gets (6p)/2. Production cost is zero.a) Show that the best response to your rival posting a price of 6 is to post the monopoly price of 3. What is the best response against a rival's price of 4? of 5?
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter15: Strategic Games
Section: Chapter Questions
Problem 15.3IP
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