Question
Differentiated Bertrand Competition. There are two firms i = 1, 2 simultaneously choosing prices pi [0, 1]. The demand of firm i is Di(pi ,
Differentiated Bertrand Competition. There are two firms i = 1, 2 simultaneously choosing prices pi [0, 1]. The demand of firm i is Di(pi , pi) = 1 3pi + pi and it has zero production costs. That is, firm i's payoff is piDi(pi , pi)
(a) Find the best response function of firm i.
(b) Find the set of 1-rationalizable, 2-rationalizable and 3-rationalizable strategies.
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Economics of Money Banking and Financial Markets
Authors: Frederic S. Mishkin
12th edition
134733821, 134733827, 9780134734507 , 978-0134733821
