Macroeconomics Exam Review 72

Macroeconomics Exam Review 72 - 2.60 In the standard...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 2.60 In the standard Bertrand model of oligopoly ∙ the strategy space of each firm is ℜ + , a lattice. ∙ ( , p − ) is supermodular in (Exercise 2.51). ∙ If the other firm’s increase their prices from p 1 − to p 2 − , the effect on the demand for firm ’s product is ( , p 2 − ) − ( , p 1 − ) = ∑ ∕ = ( 2 − 1 ) If the goods are gross substitutes, demand for firm increases and the amount of the increase is independent of . Consequently, the effect on profit will be in- creasing in . That is the payoff function (net revenue) has increasing differences in ( , p − ). Specifically, ( , p 2 − ) − ( , p 1 − ) = ∑ ∕ = ( − ¯ )( 2 − 1 ) For any price increase p 2 − ≩ p 1 −...
View Full Document

This note was uploaded on 01/16/2012 for the course ECO 2024 taught by Professor Dr.dumond during the Fall '10 term at FSU.

Ask a homework question - tutors are online