Two firms are competing on price. If they have the same price, they share the market otherwise the one with the lowest price captures all demand Market demand follows Q(P)=100-3P Cost is C(Q)=10Q Firms can only choose between the following prices: 9, 10, 11, 12. In the Nash equilibrium of this game, what prices are charged? Suggestion: calculate the profits they obtain for each of the price combinations, write down the game in its normal form (payoff matrix), and then use the underlining method to match best responses. 9 12 ☐ 10 ☐ 11 14

Two firms are competing on price. If they have the same price, they share the market otherwise the one with the lowest price captures all demand Market demand follows Q(P)=100-3P Cost is C(Q)=10Q Firms can only choose between the following prices: 9, 10, 11, 12. In the Nash equilibrium of this game, what prices are charged? Suggestion: calculate the profits they obtain for each of the price combinations, write down the game in its normal form (payoff matrix), and then use the underlining method to match best responses. 9 12 ☐ 10 ☐ 11 14

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 13PAE

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