Imperfect competition in output markets

5 important questions on Imperfect competition in output markets

What is the model setup of the betrand model?

each firm believes that its rivals will not respond to its own price choice and maximize its own profits.

What is a nash-bertrand equilibrium?

Neither firm can increase its profits bby unilaterally changing its price

What are the assumptions of the bertrand model?

1. firms are symmetric
2. firms compete by simultanuously choosing the price
3. firms are not capacity constrained
4. consumers have perfect info
5. zero transaction costs
6. There is 1 round of competition
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What is the bertrand paradox?

2 firms behave as perfect competitors

What are the assumptions of the stackelberg model?

1. firms are symmetric
2. firms compete by choosing sequentically the q
3. consumers have perfect information &
4. zero transaction costs  
5. all goods sell for the same price

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