Two internet providers, Bombast and Horizon, compete in the same town. The market includes 60,000 households...

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Two internet providers, Bombast and Horizon, compete in the same town. The market includes 60,000 households that are potential users, and since all of them need internet service, the market is fixed in size. Bombast and Horizon each spent $15 million to develop their networks; serving a user costs $25 per month. Which price will the firms charge in the Nash equilibrium of the Bertrand duopoly game, and how much profit or loss will they have made after the first year? They will each charge $25 per subscribed household and lose $15 million. They will each charge $50 per subscribed household and break even. They will each charge $75 per subscribed household and make $12 million in profit. They will each charge $100 per subscribed household and make $57 million in profit. Two internet providers, Bombast and Horizon, compete in the same town. The market includes 60,000 households that are potential users, and since all of them need internet service, the market is fixed in size. Bombast and Horizon each spent $15 million to develop their networks; serving a user costs $25 per month. Which price will the firms charge in the Nash equilibrium of the Bertrand duopoly game, and how much profit or loss will they have made after the first year? They will each charge $25 per subscribed household and lose $15 million. They will each charge $50 per subscribed household and break even. They will each charge $75 per subscribed household and make $12 million in profit. They will each charge $100 per subscribed household and make $57 million in profit.

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The answer for this question is They will each charge 50 per subsc... View the full answer