Consider the market for nonalcoholic beers from the previous question.Which of the following is the best-response function for Boors from the Bertrand game?
A)PB = -2.5 + .05PC
B)PB = 2.5 + .05PC
C)PC = 2.5 - .05PB
D)PB = 2.5 - .15PC

Question

Quizplus · Accepted Answer

The best-response function for a firm in a Bertrand competition model typically relates its optimal price to the price set by its competitor. Option B) PB = 2.5 + .05PC correctly represents a situation where Boors sets its price as a function of its competitor's price (PC), indicating that Boors' optimal price increases as its competitor's price increases, which is a plausible scenario in a Bertrand model where firms compete on prices.

Consider the Market for Nonalcoholic Beers from the Previous Question