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Consider our model of Bertrand price competition with homogeneous goods. Each firm simultaneously and independently announce non-negative, integer...
Consider our model of Bertrand price competition with homogeneous goods. Each firm simultaneously and independently announce non-negative, integer prices where p . Consumers purchase from the firm with the lowest price. If the firms announce the same price, half the consumers purchase from each. Market demand is given by Q(P) = 40 - P where P is the lowest announced price. Firm one has a constant marginal cost of 0. Firm two has a constant marginal cost of 5. (Note: 12 is less than the monopoly price for either firm.)
a. Find BR1(12), BR1(6), BR1(5), BR1(4) and BR1(0). Find BR2(12), BR2(6), BR2(5), BR2(4) and BR2(0). Show your work or briefly explain your logic
