Is There a First-Mover Advantage in the Bertrand Duopoly Model

question 78

Multiple Choice

Is there a first-mover advantage in the Bertrand duopoly model with homogenous products?

• A) Yes, first-movers always hold the advantage over other firms.
• B) Yes, first-movers may have an advantage, but it depends on the model assumptions.
• C) No, first-movers cannot choose a profit maximizing quantity because the second-mover can always produce a bit less and earn higher profits.
• D) No, the second-mover would be able to set a slightly lower price and capture the full market share.

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Definitions:

Sales Data

Information that represents the quantity sold and revenues generated from goods or services over a certain period of time.

Vertical Analysis

A financial analysis method that lists each account on the financial statements as a percentage of a base number.

Gross Profit Margin

A financial metric that measures the difference between revenue and cost of goods sold (COGS), expressed as a percentage of revenue.

Horizontal Analysis

A financial analysis technique that compares historical financial information over a series of reporting periods.