Part 2: First Long QuestionThere are two French bakeries in a small town: Le MeilleurCroissant (C), owned by Camille, and Le Meilleur Pain AuChocolat (P), owned by Paul. In each period of an infinitelyrepeated game, they compete a la Bertrand, with marketdemand given by Q(pmin) = 10 - Pmin- Even though they sellidentical goods, they have different marginal costs: cc = 2 and%3DCp = 4 (Paul bakes just as well but is bad at businessdecisions). There are no fixed costs.Question 6Turns out that Camille and Paul are married, and so theychoose prices to maximize the joint profits of the two firms.Because both love baking and love each other, they alsojointly decide that both firms should be selling positiveamounts in their optimal plan. What prices do they choose?Pc = 6, pp = 11Pc = 6.5, pp = 6.5Pc = 6, pp = 6Pc = 7, pp = 7%3DO pc = 6, pp = 7

For the above game Bertrand price competition is possible in which the one with higher marginal cost…

Part 2: First Long Question There are two French bakeries in a small town: Le Meilleur Croissant (C), owned by Camille, and Le Meilleur Pain Au Chocolat (P), owned by Paul. In each period of an infinitely repeated game, they compete a la Bertrand, with market demand given by Q(pmin) = 10 - Pmin: Even though they sell identical goods, they have different marginal costs: cc = 2 and %3D Cn = 4 (Paul bakes just as well but is bad at business

Part 2: First Long Question There are two French bakeries in a small town: Le Meilleur Croissant (C), owned by Camille, and Le Meilleur Pain Au Chocolat (P), owned by Paul. In each period of an infinitely repeated game, they compete a la Bertrand, with market demand given by Q(pmin) = 10 - Pmin: Even though they sell identical goods, they have different marginal costs: cc = 2 and %3D Cn = 4 (Paul bakes just as well but is bad at business

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.8P

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