problem code : 110609MICRO

Posted by vishruti on Jun 11, 2009; 9:47am
URL: http://discussion-forum.276.s1.nabble.com/problem-code-110609MICRO-tp3061147.html

Consider two firms in Bertrand market model. The inverse demand of the two firms is Qi = a – 2Pi + Pj such that j, I = {1, 2} and i and j are distinct. Assume zero marginal cost.What is the equilibrium price, quantity and profit of both firms?

Now instead of setting prices simultaneously the firms now decide to set prices in a sequence starting with firm 1. That is, firm 2 sets its prices after the firm 1 has declared its price. Find the new equilibrium for the two firms and compare the results with the previous situation.

give equilibrium price , quantity and profit for both firms and both situations