Two firms engage in Bertrand competition in differentiated products.After doing all the appropriate calculations,you find the best-response functions are and .Without doing any further calculations,can you determine the relationship between their Nash equilibrium prices?

Question

Two firms engage in Bertrand competition in differentiated products.After doing all the appropriate calculations,you find the best-response functions are  and  .Without doing any further calculations,can you determine the relationship between their Nash equilibrium prices?

Quizplus · Accepted Answer

Without doing any further calculations, we cannot determine the exact relationship between their Nash equilibrium prices. However, we can say that both firms' best-response functions are linear (as they have the same slope), and therefore the Nash equilibrium prices will be equal. Therefore, the correct answer is A.

Two Firms Engage in Bertrand Competition in Differentiated Products