Consider a situation of price competition between two firms, Business Economics

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Consider a situation of price competition between two firms

Consider a situation of price competition between two firms. Both firms have the same unit costs of c = 20.

(i) First assume firms choose their price simultaneously. Explain precisely whether (PA = 25, PB = 24.99) is a Nash Equilibrium in this game.

(ii) Now suppose firm A sets its price PA before firm B chooses price PB. Again explain precisely whether (PA = 25, PB = 24.99) is a SPE in this game.

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Business Economics: Consider a situation of price competition between two firms

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Business Economics: Consider a situation of price competition between two firms

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