Price setting oligopolists Flashcards
1
Q
What are Bertrands specific assumptions?
A
- Two firms in the market
- Sellers choose and compete on price
- Further market entry is blocked
- Firms produce homogenous products
- Firms have no fixed costs
- Firms have constant marginal costs
2
Q
What is nash equilibrium in Bertrands model?
A
When no firm wants to change its price, holding other firms price constant
3
Q
What are four main ways to break the Bertrand Paradox?
A
- Product differentitation
- Capacity constraints
- Incomplete information
- Repeated interaction
