Ollivander and Arturo Cephalopos are two producers of wands in the wizarding world. They both sell...

Ollivander and Arturo Cephalopos are two producers of wands in the wizarding world. They both sell excellent wands which are extremely similar in quality and could be considered almost perfect substitutes. They engage in Bertrand competition, which means they compete by setting price. Ollivander’s marginal cost of producing one wand is 7 Galleons, while for Cephalopos the marginal cost is 10 Galleons. NOTE: 1 Galleon = 17 Sickles or 493 Knuts. Treat sickle as a cent.

1. What is the Bertrand equilibrium price in this market?

A) 10 Galleons

B)15 Galleons

C)7 Galleons

D) 9 Galleons and 16 Sickles

Solutions

Expert Solution

Rahul Sunny answered 1 month ago

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