Bertrand Competition
Two firms with identical marginal cost c simultaneously set prices for an identical good; all consumers buy from the cheaper firm (splitting evenly on ties). At what price does each firm sell in the Nash equilibrium?
Related problems & prerequisites
Worth solving first
- Stackelberg Leadership 5.0/10
Source: Joseph Bertrand's (1883) critique of the Cournot model. Statement written for AxiomIQ.