Two firms produce different goods.Firm 1 has a positive-sloped reaction function.This can be explained best by:
A) homogeneous product Cournot oligopoly.
B) homogeneous product Bertrand oligopoly.
C) heterogeneous product Bertrand oligopoly.
D) None of the preceding answers is correct.

Question

Quizplus · Accepted Answer

In a heterogeneous product Bertrand oligopoly, firms produce differentiated products and compete on prices, which can lead to a positive-sloped reaction function as firms adjust their prices in response to competitors, unlike in homogeneous product models where competition often drives prices down to marginal cost.

Two Firms Produce Different Goods