BERTRAND COMPETITION: And what would be your guess for the Bertrand competition

Expert Solution

Bertrand competition:

Bertrand Competition was developed by French mathematician Joseph Louis François Bertrand, who investigated claims of the Cournot model in Recherches sur les Principes Mathématiques de la Théorie des Richesses (1838).It is a model of competition, which describes interactions among firms that set prices and their customers that choose quantities at the prices set. Cournot argued that when firms choose quantities, the equilibrium outcome involves firms pricing above marginal cost and hence the competitive price. Bertrand argued that if firms chose prices rather than quantities, then the competitive outcome would occur with price equal to marginal cost. The Cournot model argued that firms in duopoly would keep prices above marginal cost and be quite profitable.

Rahul Sunny answered 2 years ago

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