Suppose four firms engage in price competition in a Bertrand setting where the lowest- price firm will capture the entire market. The firms differ…
8. Suppose four firms engage in price competition in a Bertrand setting where the lowest- price firm will capture the entire market. The firms differ with respect to their costs. Firm A’s marginal cost per unit is $ 8, firm B’s is $ 7, firm C’s is $ 9, and firm D’s is $ 7.50. a. Which firm will serve the market? What price ( approximately) will it charge? b. Would your answer change if firms A and B had somewhat greater fixed costs of production than firms C and D?
8. a) Firm B will serve the market, and it will charge a price slightly less than $7.50, $(7.50b) No, it will not change my answer.
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