Two firms are competing on price. If they have the same price, they share the market otherwise the one with the lowest price captures all demand Market demand follows Q(P)=100-3P Cost is C(Q)=10Q Firms can only choose between the following prices: 9, 10, 11, 12. In the Nash equilibrium of this game, what prices are charged? Suggestion: calculate the profits they obtain for each of the price combinations, write down the game in its normal form (payoff matrix), and then use the underlining method to match best responses. 9 12 ☐ 10 ☐ 11 14

Two firms are competing on price. If they have the same price, they share the market otherwise the one with the lowest price captures all demand Market demand follows Q(P)=100-3P Cost is C(Q)=10Q Firms can only choose between the following prices: 9, 10, 11, 12. In the Nash equilibrium of this game, what prices are charged? Suggestion: calculate the profits they obtain for each of the price combinations, write down the game in its normal form (payoff matrix), and then use the underlining method to match best responses. 9 12 ☐ 10 ☐ 11 14

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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