Question
Suppose the demand for a certain good is when the price is p. Suppose there is single firm produces at a constant marginal cost of
Suppose the demand for a certain good is
when the price is p. Suppose there is single firm produces at a constant marginal cost of c = 2 and has no fixed costs, so the profit. If this firm acts as a monopoly, verify that the monopoly price is 5.
However, assume that there are two firms identical firms and they compete, through Bertrand Competition (described in class). However, firms 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) A1A2:
If the game dominance solvable, enter the IEDS equilibrium prices (p1*, p2*) on Canvas. If the game is not dominance solvable, then enter 'N' for the values of p1* and p2* on Canvas.
Firm 2's choice of p2 Firm 1's choice of p1 Table 1. Firm 2's choice of p2 Firm 1's choice of p1 Table 1
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