Bertrand paradox, Microeconomics

Consider the following duopoly with differentiated goods where x1  and  x2  denote the amounts of the goods 1 and 2  respectively, with prices p1  and  p2. The demand functions are:

x1 = 1-2p1 + p2

x2 = 1-2p2 + p1  

And the corresponding unitary production costs are c1= 0 and c2= 0.5

 i) Determine the solution under perfect competition  and if there is collusive behaviour between the two firms (i.e., prices, quantities and profits).

ii) The two firms decide now simultaneously. If the firms could determine if they compete in prices or quantities which variable would they choose? Determine the corresponding equilibria (prices, quantities and the profits) and provide an interpretation of the results. 

iii) Do we get the Bertrand paradox here? Comment on the result. 

iv) Check that the Stakelberg-Bertrand solution is p1 = 3/7 y p2 = 17/28. Compare the profits of the leader (firm 1) and the follower. Any surprise? Comment on it.

Posted Date: 2/21/2013 3:10:49 AM | Location : United States







Related Discussions:- Bertrand paradox, Assignment Help, Ask Question on Bertrand paradox, Get Answer, Expert's Help, Bertrand paradox Discussions

Write discussion on Bertrand paradox
Your posts are moderated
Related Questions
explain the central problem of economy with production possibility curve?

Analyse the method by which a firm can allocate the given advertising budget between different media for advertisement?


supply and demand

cual es la minina

Where minimum efficient scale is very huge for capital intensive operations, it may be more cost effective to allow one company to spread its fixed costs over a very huge number of

Due April 8 a) Produce some initial summary statistics of the data. b) State the hypotheses that will be tested. Show me advanced results (analyses, not write-up/paper) Due April

state 3 major assumptions which a production posibility is based

If the MU of the 1st unit consumed = 75 utils, and the TU of consuming 2 units is 130 utils, what is the marginal utility of the second unit?

WTO Agreements: The WTO administers 29 agreements; these cover different areas like trade in goods and services, investment measures, intellectual property rights, etc. Some o