Consider Two Firms Engaged in Bertrand Competition with Differentiated Goods

question 46

Multiple Choice

Consider two firms engaged in Bertrand competition with differentiated goods and zero marginal costs.
Firm A's demand curve: q_A = 120 - 3P_A + 2P_B
Firm B's demand curve: q_B = 120 - 3P_B + 2P_A
In a Nash equilibrium, what is each firm's price?

• A) P_A = $5; P_B = $5
• B) P_A = $10; P_B = $10
• C) P_A = $30; P_B = $30
• D) P_A = $20; P_B = $20

---

Definitions:

Ideas

Mental concepts or thoughts that arise from the creative or intellectual ability of the mind.

Reason

The faculty of the mind by which it distinguishes between right and wrong, truth and falsehood, or makes logical deductions.

Practical

Concerned with actual use or application rather than theory or ideas; focusing on what is effective or achievable in real situations.

Kurt Lewin

A seminal figure in psychology, known for being one of the founders of social psychology and for developing theories related to group dynamics and organizational development.