Consider the following one-shot Bertrand game. Two identical firms produce an identical product at zero cost....

Consider the following one-shot Bertrand game. Two identical firms produce an identical
product at zero cost. The aggregate market demand curve is given by 6 − p , where p
is the price facing the consumers. The two firms simultaneously choose prices once.
Suppose further that the firm that charges the lower price gets the entire market and if
both charge the same price they share the market equally. Assume that prices can only
be quoted in integer units (only prices of 0, 1, 2, ... are allowed).
(a) Find the monopoly price. [5 marks]
(b) Find all the pure strategy Nash equilibria. [10 marks]
(c) Find that the set of prices that survive iterative elimination of weakly dominated
strategies. [20 marks]

Expert Solution

b) Each firm has 3 strategies (0,1,2)

That is either to choose price 0 or 1 or 2.

Rahul Sunny answered 8 months ago

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Consider the following one-shot Bertrand game. Two identical firms produce an identical product at zero cost....

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