445 Ch 10 - 10.1 Bertrand Duopoly Model When firms choose...

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10.1 Bertrand Duopoly Model When firms choose prices, rather than quantities, it is more convenient to rewrite the  demand function and have total output as the dependent variable.  Simultaneous-move pricing games are called  Bertrand Competition When two identical firms play Bertrand Price competition, the equilibrium is  P=MC From monopoly to competition: With one price-setting firm, consumers pay monopoly prices With two or more identical firms without capacity constraints, consumers pay P=MC and  firms receive zero profit.  10.2 Bertrand Reconsidered When capacity constraints come into play, (p=c) cannot be a Nash equilibrium because  the current capacity is unable to sustain the threshold of the market.  Firms competing in prices selling identical products will rarely choose the  capacity necessary to serve the total market demand forthcoming at competitive  prices Both output and capacity will be less then the competitive level. 
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