Bertrand’s Model of Oligopoly Homework Help for Cheap and Best Assistance
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What is Bertrand’s Competition?
This competition is an economic competition model named after the famous Joseph Louis Bertrand. It is described as the interactions among sellers who set price and the buyers or customers who choose amount of quantity at set price. For more details see our Bertrand’s model of oligopoly assignment help.
This model has specific assumptions. Two firms or more produce undifferentiated or homogeneous product and in any way can’t cooperate. Simultaneously prices are set by the firms competing and consumers will try to buy from the lower priced firm. If both the firms are charging the same for the product, the demand of consumers is evenly split.
A very crucial assumption about technology is both firms’ production cost of a unit is constant. This makes average and marginal costs same and price is equally competitive. This means if price is set above unit cost then firms will willingly supply the amount demanded. Now if price is equal to cost of unit then it’s indifferent as no profit is earned. A firm will not sell below the price of unit cost. It wouldn’t sell anything as each unit which is sold will make no profit but create loss for them. Get all the assumptions from our Bertrand’s model of oligopoly homework help.
Duopoly Equilibrium of this Model
In this model competitive price is Nash equilibrium because of certain reasons. First of all, neither firm will have any profits if both the firms set competitive price with marginal cost equalling to price. But if one firms’ price is set equal to cost of margin and another firm increases price above the cost of unit then nothing can be earned as customers will buy from firm which is setting competitive price.
If both the firms set same price which is more than unit cost then both firms get an incentive by a small amount and also capture whole market make double profits. No equilibrium will be there if firms set price above the marginal cost. Similarly, there won’t be any equilibrium when firms set different prices. More materials are available from our Bertrand’s model of oligopoly assignment help.
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