Consider classical price competition model (Bertrand) with marginal cost c>0 across all n firms. There is...

 

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Consider classical price competition model (Bertrand) with marginal cost c>0 across all n firms. There is a unit mass of consumers and their willingness to pay is v. Now consider the "entry" stage of the market. If the firm chooses not to pay, when each of the n firms may pay a fixed cost of f>0 to enter the their payoff is zero. On the second stage of the game game firms play Bertrand competition as normal. Find all pure and mixed subgame-perfect equilibria of this game. Consider classical price competition model (Bertrand) with marginal cost c>0 across all n firms. There is a unit mass of consumers and their willingness to pay is v. Now consider the "entry" stage of the market. If the firm chooses not to pay, when each of the n firms may pay a fixed cost of f>0 to enter the their payoff is zero. On the second stage of the game game firms play Bertrand competition as normal. Find all pure and mixed subgame-perfect equilibria of this game.

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Step 1 Price elasticity of demand PED or E d is a measure used in ec... View the full answer