There are two firms competing à la Bertrand,and Firm A has a marginal cost strictly greater than that of Firm B.What will happen in this case?

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Since Firm A has a higher marginal cost than Firm B, it cannot sustain lower prices and will eventually exit the market if it keeps undercutting Firm B. Therefore, Firm B will keep undercutting Firm A until Firm A's profits become negative and it exits the market. In equilibrium, Firm B will make positive profits and Firm A will make zero profits. This is known as the "predatory pricing" strategy, where Firm B sets a price that is below its own marginal cost and even below Firm A's marginal cost, in order to drive Firm A out of the market.

There Are Two Firms Competing à La Bertrand,and Firm a Has