Consider a duopoly with firms A and B, which engage in price competition ("Bertrand"). Both firms offer homogenous products. Total costs are given by CA(q) = 10 q for firm A and by CB(q) = 21 q for firm B. Inverse demand is given by P(q) 120 q. In this market, firms are only allowed to charge integer values as prices. Moreover, suppose that at a market price equal to their respective marginal cost each firm would rather be active and sell at marginal cost (yielding zero profits) than not to produce at all (also yielding zero profits). (a) Determine the equilibrium profits of the two firms. (b) Determine the maximum amount that firm A would be willing to pay firm B to exit the market. (c) Determine the minimum amount that firm B would accept to exit the market. explain with all mathematical steps and no plagiarism or copy paste answer, this is third time posting. no chatgpt answers. only attempt when you know. otherwise downvote. give explantion with mathematical steps.
Consider a duopoly with firms A and B, which engage in price competition ("Bertrand"). Both firms offer homogenous products. Total costs are given by CA(q) = 10 q for firm A and by CB(q) = 21 q for firm B. Inverse demand is given by P(q) 120 q. In this market, firms are only allowed to charge integer values as prices. Moreover, suppose that at a market price equal to their respective marginal cost each firm would rather be active and sell at marginal cost (yielding zero profits) than not to produce at all (also yielding zero profits). (a) Determine the equilibrium profits of the two firms. (b) Determine the maximum amount that firm A would be willing to pay firm B to exit the market. (c) Determine the minimum amount that firm B would accept to exit the market. explain with all mathematical steps and no plagiarism or copy paste answer, this is third time posting. no chatgpt answers. only attempt when you know. otherwise downvote. give explantion with mathematical steps.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.4P
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Transcribed Image Text:Consider a duopoly with firms A and B, which engage in price competition ("Bertrand"). Both firms offer homogenous
products. Total costs are given by CA(q) = 10 q for firm A and by CB(q) = 21 q for firm B. Inverse demand is given
by P(q) 120 q. In this market, firms are only allowed to charge integer values as prices. Moreover, suppose that at a
market price equal to their respective marginal cost each firm would rather be active and sell at marginal cost (yielding
zero profits) than not to produce at all (also yielding zero profits). (a) Determine the equilibrium profits of the two firms.
(b) Determine the maximum amount that firm A would be willing to pay firm B to exit the market. (c) Determine the
minimum amount that firm B would accept to exit the market. explain with all mathematical steps and no plagiarism or
copy paste answer, this is third time posting. no chatgpt answers. only attempt when you know. otherwise downvote.
give explantion with mathematical steps.
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