Q6 Suppose the market demand is given by Q 3 100 — р, where Q is the total quantity demanded and p is the price. Consider a one shot Bertrand duopoly, where firms compete on price instead of quantity. If the prices are not identical then everyone purchases the product from the firm with the lower price, If the prices charged by the two firms are the same, then each firm sells half of the market quantity demanded at that price. A firm produces only after it learns how many units it is able to sell. That is, it is not left with any unsold units of the good. Both firms have a constant marginal cost, c = 15. Suppose that prices can be charged only in multiples of $10 (i.e., $10, $20, $30, ... and so on). Note, the prices are discrete in this problem. Is (pi = 30, p2 = 30) a Nash equilibrium? 1) Yes. (pi = 30, p2 = 30) is a Nash equilibrium. 2) No. (pi = 30, p2 = 30) is not a Nash equilibrium.

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