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Consider now a Bertrand competition environment with one good and two firms, Firm 1 and Firm 2. The (pure) strategy space of Firm 1 is
Consider now a Bertrand competition environment with one good and two firms, Firm 1 and Firm 2. The (pure) strategy space of Firm 1 is ; = [0,5], and the strategy s; of Firm 1 corresponds to the price they charge for the good. Similarly, the (pure) strategy space of Firm 2 is S2 = [0, 5], and the strategy s, of Firm 2 corresponds to the price they charge for the good. If Firm 1 were to choose price sy and Firm 2 were to choose price s,, then the demand Firm 1 would face is given by 1 if 51 82, the demand Firm 2 would face is given by 1 ifso S1, the utility of Firm 1 would be their profit, u;(s1,s2) = (s1 1)D1(s1, s2), and the utility of Firm 2 would be their profit, us(s1,s2) = (s2 1)Da(s1,82). (The marginal cost of production for both firms is 1.) (c) Find the pure-strategy Nash equilibria of this game. Consider now an altered version of the Bertrand competition environment above in which the (pure) strategy space of Firm 1is S = {0, 1,2, 3,4, 5}, the (pure) strategy space of Firm 2is S, = {0, 1,2, 3,4, 5}, and otherwise the game is the same as the Bertrand competition environment above. (d) Find the pure-strategy Nash equilibria of this game
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