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In the differentiated products version of the Bertrand duopoly model, firms set prices for imperfectly substitutable goods. Based on the equilibrium of that model, how
In the differentiated products version of the Bertrand duopoly model, firms set prices for imperfectly substitutable goods. Based on the equilibrium of that model, how is the Lerner Index related to product substitutability? It may help to recall that the parameter theta represents substitutability (the opposite of differentiation), such that high values of theta imply products that are more substitutable, and low values imply products that are less similar to one another. A) The Lerner Index decreases as product substitutability rises. ( B) The Lerner Index increases as product substitutability rises. ( C) The Lerner Index is unrelated to product substitutability. OD) The Lerner Index determines how substitutable the products are
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