In the Bertrand model with homogeneous products,
A) the firm that sets the lower price will capture all of the market.
B) the Nash equilibrium is the competitive outcome.
C) both firms set price equal to marginal cost.
D) all of the above
E) the outcome is inconclusive.

Question

Quizplus · Accepted Answer

In the Bertrand model with homogeneous products, the firm that sets the lower price captures the entire market, leading to a Nash equilibrium where both firms set their prices equal to marginal cost. This results in a competitive outcome, making all of the statements correct.

In the Bertrand Model with Homogeneous Products