Environment 1. Alice (A) and Bob (B) are the sole producers in the market for bubblegum. Such market is populated by a unit mass continuum of consumers with unit demand and have valuations 0 ~ U(0,2). Such valuations are drawn iid across consumers. When either A or B produce q (0,1) units of bubblegum at a price of p, their profits equal to (p, q) = pq - n1q>0, n (0,1) (1) Bertrand Competition (. 25 points) I assume the same timing as in the previous question, BUT produc- ers pick prices p rather than quantities. Assume n = 0. 1. (5 points.) Define buyer and producer strategies. 2. (5 points.) Define equilibrium. 3. (10 points.) Characterize equilibrium. 4. (5 points.) Calculate profits and consumer surplus. 1 Environment 1. Alice (A) and Bob (B) are the sole producers in the market for bubblegum. Such market is populated by a unit mass continuum of consumers with unit demand and have valuations 0 ~ U(0,2). Such valuations are drawn iid across consumers. When either A or B produce q (0,1) units of bubblegum at a price of p, their profits equal to (p, q) = pq - n1q>0, n (0,1) (1) Bertrand Competition (. 25 points) I assume the same timing as in the previous question, BUT produc- ers pick prices p rather than quantities. Assume n = 0. 1. (5 points.) Define buyer and producer strategies. 2. (5 points.) Define equilibrium. 3. (10 points.) Characterize equilibrium. 4. (5 points.) Calculate profits and consumer surplus. 1