Bertrand paradox, Microeconomics

Assignment Help:

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.


Related Discussions:- Bertrand paradox

What are the possibilities of returns to scale in production, What are the ...

What are the possibilities of returns to scale in production technology? Three possibilities are there as: technology exhibits (a) constant returns to scale; (b) decreasing ret

Balancing needs and resources, Balancing Needs and Resources planning ...

Balancing Needs and Resources planning is a balancing act. It involves the balancing of needs with resources towards set goals. Likewise, educational planning involves the bal

What is explanatory research?, Explanatory research is research conducted i...

Explanatory research is research conducted in order to describe any behavior in the market. It could be done by using questionnaires, group discussions, random sampling,  interview

Economics, What happens when oil eventually runs out?? can''t we just pay ...

What happens when oil eventually runs out?? can''t we just pay doctors and nurses more money?? The unemployed should get off their backsides and get a job??

Difference between anticipated and unanticipated inflation, Explain inflati...

Explain inflation, and the difference between anticipated and unanticipated inflation.         Answer   Inflation is the persistent rise in the general price level in the e

Return on machine, a machine cost 18871.00 today. at the end of each year I...

a machine cost 18871.00 today. at the end of each year I own the machine & it gives me returns of 4,948.00 after paying repairs and maintenance. After 6 years, I expect to sell it

Indifference curves, why men and womens indifference curves are different

why men and womens indifference curves are different

Economic theory, Much of undergraduate macroeconomic theory is discussed on...

Much of undergraduate macroeconomic theory is discussed on the assumption that, in the short run, the expectations of economic agents about the future values of macroeconomic varia

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd