Which Assumptions of the Bertrand Model Be Altered to Avoid

question 4

Multiple Choice

Which assumptions of the Bertrand model be altered to avoid the Bertrand Paradox (that an outcome resembling perfect competition may arise with even as few as two firms) ?

• A) assuming firms have limited capacities.
• B) assuming firms produce differentiated rather than homogeneous products.
• C) assuming firms play repeatedly and thus may collude.
• D) all of the above.

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Definitions:

Arrival Rate

The frequency at which entities like people, goods, or events reach a point of processing or observation.

Service Rate

The Service Rate is a measure of the capability of a service system to handle customer demands or transactions within a given time frame, often used in queuing theory.

Poisson Distribution

A statistical distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space when these events happen with a known constant rate and independently of the time since the last event.