In a duopoly with homogeneous products,the best response of a firm is to charge a lower price than its rival as long as ________.

Question

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The best response for a firm in a duopoly with homogeneous products is to charge a lower price than its rival as long as the rival's price is above marginal cost. In this situation, the firm can capture more market share and increase its profits. If the rival's price is below marginal cost, then the firm may consider matching the price or exiting the market altogether. If the rival's price is above average cost, then the firm may not be able to compete on price and may have to find other ways to differentiate its product or services. If the rival's price is below average cost, then the firm may consider matching the price or reducing its production to avoid losses.

In a Duopoly with Homogeneous Products,the Best Response of a Firm