In a Bertrand Competition, with Differentiated Goods in a Market

question 111

Multiple Choice

In a Bertrand competition, with differentiated goods in a market structure of two firms, firm A's reaction function gives:

• A) optimal quantity for A as a function of quantity for B.
• B) optimal price for A as a function of price for B.
• C) optimal price for A as a function of quantity for A and quantity for B.
• D) optimal quantity for A as a function of price for B.

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Definitions:

Marginal Cost

The additional financial burden of creating another unit of a product or service.

Price Elasticity

The extent to which consumer demand for a good changes in response to a change in the good's price, represented by the ratio of percentage change in demand to percentage change in price.

Product Differentiation

The process by which companies distinguish their products from those of competitors, through design, features, branding, quality, or other attributes.

Product Differentiation

The process of distinguishing a product from others in the market to attract a specific target market.