In an initial Nash- Bertrand equilibrium, two firms with differentiated products charge the same equilibrium prices. A consumer testing agency praises the product of one firm, causing its demand curve to shift to the right as new customers start buying the product. (The demand curve of the other product is not substantially affected.) Use a graph to illustrate how this new information affects the Nash- Bertrand equilibrium. What happens to the equilibrium prices of the two firms?
Answer to relevant QuestionsSuppose that identical duopoly firms have constant marginal costs of $ 10 per unit. Firm 1 faces a demand function of q1 = 100 - 2p1 + p2, where q1 is Firm 1’ s output, p1 is Firm 1’ s price, and p2 is Firm 2’ s price. ...Q& A 11.3 shows that a monopolistically competitive firm maximizes its profit where it is operating at less than full capacity. Does this result depend upon whether firms produce identical or differentiated products? Why?Modify Question 1.5 so that if Firm 1 chooses High and Firm 2 chooses Low (the upper right corner), Firm 1 receives 1 rather than 3. How does that change youranswer?How would the analysis in Q & A 12.2 change if the payoffs to both firms are 3 in the upper left corner of the profit matrix (where both firms choose the Amazon standard) and the payoffs to both firms are 2 in the lower ...Charity events often use silent auctions. A donated item, such as a date with a movie star, is put up for bid. (See www.ecorazzi.com/2008/02/22/ebay-and-oxfam-help-you-win-a-date-with-colin-firth for a description of ...
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