Consider a Bertrand duopoly with a homogeneous product, market demand y = y1 + y2 = 1 - p, and cost functions C(y_i) = (1/2)y_i for i = 1, 2. Each firm simultaneously quotes a price in [0, 1]; the lower-price firm serves the whole market, and equal prices split demand. What would be the Nash equilibrium price and quantities?
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Monopolistic competition and oligopoly has come up 104 times in 7 exams since 2004.
This question is on Bertrand competition, part of Monopolistic competition and oligopoly in Microeconomics.
Firms competing on price, and why identical firms price at marginal cost.
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Question from the UGC-NET 2023 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.