If the firms in a duopoly are incapable of satisfying total market demand at any price, the Bertrand model predicts that:

Question

Quizplus · Accepted Answer

In the Bertrand model, when firms are incapable of satisfying total market demand at any price, they will not be forced down to marginal cost pricing due to the excess demand. This allows both firms to maintain prices above marginal cost, leading to positive economic profits. Additionally, since they are responding to the same market demand, they will tend to set the same price to capture the market, leading to both firms charging the same price.

If the Firms in a Duopoly Are Incapable of Satisfying