Answered: e marginal cost

Business

Economics

e marginal cost

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Two firms are competing in an infinitely repeated Bertrand duopoly. The marginal cost of both is
equal to 6. There are no fixed costs. The demand function for the good is q = 10 – p, where q is the
total quantity demanded and p the price.
(a) Find the equilibrium in the infinitely repeated game in which the two firms share the market
equally.
(b) Suppose that firm l's marginal cost falls to 0. The other firm's marginal cost is still 6. Is there
an equilibrium in the infinitely repeated game in which the two firms share the market?

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Step 2: Explain the equilibrium in infinitely repeated game in which the two firms share the market equally.

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Step 3: Explain the equilibrium in the infinitely repeated game in which the two firms share the market

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