Question
There are two firms producing a good, firm 1 and firm 2. Both have constant marginal cost of production of 2. There are a total
There are two firms producing a good, firm 1 and firm 2. Both have constant marginal cost of production of 2. There are a total of 10 consumers, each of which will buy at most 1 unit of the good from whichever firm charges a lower price. If both firms charge the same price, each consumer will choose randomly which firm to buy from (so on average each firm will sell to half of all customers). The firms compete via Bertrand competition-simultaneously setting price-but they can only choose prices that are integers, i.e. 1, 2, 3, 4, etc. This game has three pure strategy Nash equilibria. What are they?
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