Bertrand Price Competition Model: Suppose there are two firms, Firm 1 and Firm 2. They produce...

Bertrand Price Competition Model:

Suppose there are two firms, Firm 1 and Firm 2. They produce a slightly differentiated product. The demand for the two products is given respectively by:
Q1 = 12 – 2P1 + P2 Q2 = 12 – 2P2 + P1

Suppose each firm’s TFC = $20 and MC = $1 The firm’s compete in prices. Firm 1 chooses P1 to maximize its profit and Firm 2 chooses P2 to maximize profits. Find P1, P2, Q1, Q2

Expert Solution

Rahul Sunny answered 2 years ago

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