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Two Firms Engage in Bertrand Competition in Differentiated Products

Question 4

Multiple Choice

Two firms engage in Bertrand competition in differentiated products. After doing all the appropriate calculations,you find the best-response functions are PB = 2.5 + .15PC and PC = 1.5 + .075PB. Without doing any further calculations,can you determine the relationship between their Nash equilibrium prices?


A) Yes,PB > PC
B) Yes,PC > PB
C) Yes,PB = PC
D) No; it cannot be determined.

Correct Answer:

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