Suppose there are two firms in a market: firm A and firm B. Further, assume that they produce a homogenous product at a constant marginal cost of $10. In the Bertrand model solution, firm A will charge a price

Question

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In the Bertrand model, firms compete by setting prices, and consumers will always choose the lowest price. As both firms have the same constant marginal cost of $10, they will set a price equal to their marginal cost in order to maximize profits. Therefore, both firms will set the same price of $10, and there will be no pricing power or differentiation between the two firms.

Suppose There Are Two Firms in a Market: Firm a and Firm