In a Bertrand Model with Differentiated Products

question 118

Multiple Choice

In a Bertrand model with differentiated products,

• A) firms can set price above marginal cost.
• B) firms set price at marginal cost.
• C) price is independent of marginal cost.
• D) firms set price independently of one another.

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Definitions:

Informational Social Influence

The effect of other people's behavior on an individual's actions and beliefs, stemming from the desire to be correct in situations where the correct action or belief is uncertain.

Cognitive Dissonance Theory

A theory suggesting that individuals experience discomfort (dissonance) from holding two or more conflicting cognitions (thoughts, beliefs, or attitudes), leading them to alter behavior or attitudes to reduce discomfort.

Role

The function or position that an individual assumes or is given in a social context, which influences behavior and expectations.

Cognitive Dissonance

The mental discomfort experienced by a person who holds conflicting beliefs, values, or attitudes, especially relating to behavioral decisions and attitude change.