problem 1. Suppose two firms facing a demand D(p) compete by setting prices simultaneously (Bertrand Competition)....

problem 1. Suppose two firms facing a demand D(p) compete by setting prices simultaneously (Bertrand Competition). Firm 1 has a constant marginal cost c1 and Firm 2 has a marginal cost c2. Assume c1 < c2, i.e., Firm 1 is more efficient. Show that (unlike the case with identical costs) p1 = c1 and p2 = c2 is not a Bertrand equilibrium.

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Expert Solution

Rahul Sunny answered 1 year ago

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