Bertrand’s Paradox:
1) Assumptions:
* Each firm is assuming that the prices of other firms are constant in deciding the quantities.* Subsequently in this model we can think about the motive to set a lower price than any other firm.* Price-undercutting as well as finally up to most competitive level.
2) Model:
Unlike Cournot model, firms will determine the price. And quantity is decided in accordance with the price.
* Market Demand: P = a − Q or Q = a − P (a > 0)
Suppose there are two flash memory (USB) companies TDK and Maxell. Assuming that the USBs are entirely identical in every aspect, then consumers try to purchase a cheaper one.
If PT < PM , QT = a − PT = Q and QM = 0
If PT = PM , QT = 1/2 (a – PT) = QM
If PT > PM , QT = 0 and QM = a − PM = Q , where Q = QM + QT .
The unique (Nash) equilibrium is accomplished if PT = PM = c, and at this level
πT = πM = (c − c) ×1/2 (a − c) = 0.
* The rationale is as follows;
At PT = PM = c, no firm can set a price lower than c. If PT > c, then Maxell can dominate the market by setting PM < PT even slightly.
If PT > PM , πT = (PT − c) × 0 = 0
If PT = PM , πT = (PT − c) × 1/2 (a − PT)
If PT < PM , πT = (PT − c) × (a − PT)
* For example, if TDK sets PT = PM − ε (ε > 0 ), then its profit will be
(PM − ε − c)(a − PM +ε ). Simply, as ε approaches to zero, its profit will go to
(PM − c)(a − PM). If TDK sets PT = PM , profit is 1/2(PM − c)(a − PM) which is about half of (PM − ε − c)(a − PM + ε) .
Example: Suppose a = 2000 , c = 800 , PM = 1000 , and PT = 999, ε = 1 .
Maxell earns 0, and TDK earns (999 − 800) × (2000 − 999) = 199,199 .
If PT = PM = 1000, πT = 1/2(1000-800)(2000-1000) = 100000
Latest technology based Microeconomics Online Tutoring Assistance
Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Microeconomics help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Microeconomics, project ideas and tutorials. We provide email based Microeconomics help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Microeconomics Homework help and assignment help services. They use their experience, as they have solved thousands of the Microeconomics assignments, which may help you to solve your complex issues of Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.
tutorsglobe.com roots modified for vital functions assignment help-homework help by online modifications of adventitious roots tutors
tutorsglobe.com trypanosoma brucei gambiense assignment help-homework help by online trypanosomes tutors
tutorsglobe.com proton-potassium pump hypothesis assignment help-homework help by online mechanism of stomatal closing and opening tutors
Theory and lecture notes of Calculating Real GDP all along with the key concepts of calculating real gdp, Real GDP, Inventories and Imputations. Tutorsglobe offers homework help, assignment help and tutor’s assistance on Calculating Real GDP.
Preparation and Reactions of Epoxides tutorial all along with the key concepts of Methods of Formation of epoxides, Chemical Properties of Epoxides, Base catalyzed cleavage, Reaction with Grignard reagent, Reduction of Epoxides and Uses of Epoxides
tutorsglobe.com harmful aspects of fungi assignment help-homework help by online fungi tutors
kirchhoffs circuit laws tutorial all along with the key concepts of history on kirchhoff's circuit laws, kirchhoff's current law, kirchhoff's voltage law, application of kirchhoff's law, bridge circuit and star delta connection
Cost reduction programme aims at improvement of human efforts at all levels of the organisation which help in reducing costs.
tutorsglobe.com reabsorption in proximal convoluted tubule assignment help-homework help by online mechanism of urine formation tutors
Theory and lecture notes of Industrial Revolution all along with the key concepts of American Long Run Growth, Productivity Growth Slowdown, Productivity Slowdown in the G-7 Economies, End of the Productivity Slowdown. Tutorsglobe offers homework help, assignment help and tutor’s assistance on Industrial Revolution.
Synthetic Dyes-Fibres tutorial all along with the key concepts of Advantages and Disadvantages of Synthetic Fibre, properties of synthetic substances, tensile strengths
Junction Field Effect Transistors tutorial all along with the key concepts of JFET characteristic curves, Operation of JFET device, JFET as an amplifier, bipolar junction transistor, single stage class A amplifier circuits
Theory and lecture notes of Macroeconomic Policy all along with the key concepts of Macroeconomic policy, Growth Policy and Stabilization Policy. Tutorsglobe offers homework help, assignment help and tutor’s assistance on Macroeconomic Policy.
TutorsGlobe.com Chemical Bonding-Metallic and Intermolecular Bonding Assignment Help-Homework Help by Online Access Chemistry Tutors
periodic table-gradations of atomic properties tutorial all along with the key concepts of electronic configuration, periodic table and atomic properties, ionization energy, electron affinity and electronegativity
1941341
Questions Asked
3689
Tutors
1482593
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!