6.Two identical firms that have the cost function C(q) = 4qj, where j = {1,2} arecompeting in a homogenous good market. The two firms make simultaneous decisions on price,and they face industry demand Q(P) = 20-p.What is the Bertrand-Nash equilibrium profit of each firm?Hints for (b) and (c): Solve for each firm j's output (q;) and use the fact that Ij = p;qj - Cj(qj).b. Now, suppose the two firms are deciding whether to set a collusive market price of$6 (this means that they would both charge $6). Solve for their profits under this pricingscheme.a.C.If one of the firms decides to deviate from the collusive scheme and undercut itsrival's price by $1, how much profit would it earn?

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6. Two identical firms that have the cost function C(q) = 4q, where j = {1,2} are competing in a homogenous good market. The two firms make simultaneous decisions on price, and they face industry demand Q(P) = 20 - p. What is the Bertrand-Nash equilibrium profit of each firm? Hints for (b) and (c): Solve for each firm j's output (q;) and use the fact that II, Pjqj - Cj(qj). b. Now, suppose the two firms are deciding whether to set a collusive market price of $6 (this means that they would both charge $6). Solve for their profits under this pricing scheme. a. c. If one of the firms decides to deviate from the collusive scheme and undercut its rival's price by $1, how much profit would it earn?

6. Two identical firms that have the cost function C(q) = 4q, where j = {1,2} are competing in a homogenous good market. The two firms make simultaneous decisions on price, and they face industry demand Q(P) = 20 - p. What is the Bertrand-Nash equilibrium profit of each firm? Hints for (b) and (c): Solve for each firm j's output (q;) and use the fact that II, Pjqj - Cj(qj). b. Now, suppose the two firms are deciding whether to set a collusive market price of $6 (this means that they would both charge $6). Solve for their profits under this pricing scheme. a. c. If one of the firms decides to deviate from the collusive scheme and undercut its rival's price by $1, how much profit would it earn?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

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