Question
Suppose the demand for a certain good is Q(p) = 10 - p (1) when the price is p. Suppose the firm produces at zero
Suppose the demand for a certain good is Q(p) = 10 - p (1) when the price is p. Suppose the firm produces at zero marginal cost and no fixed costs, so the profit. If the market is a monopoly, her profit is (pq) = p * q = p (10 - p) (2) However, assume that there are two firms and they compete, through Bertrand Competition, however each firm can only select prices from the set Ai = {1, 2, 3, 4, 5}. Express this as a strategic form game by filling in the matrix below with the corresponding payoffs to the two firms every strategy profile (p1, p2) e A1 * A2: Firm 1's choice of p1 Firm 2's choice of p2 1 2 3 4 5 1 2 3 4 5 Table 1. If the game dominance solvable, enter the IEDS equilibrium prices (p1*, p2*). If the game is not dominance solvable, then enter N for the values of p1 and p2*.
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