In the Bertrand model with product differentiation, suppose that the two Bertrand firms face the following symmetric demand curves: q1 = 96 - 2p1+1/2 p2 q2 = 96 - 2p2 + 1/2p1 where q1, q2 ≥ 0 and p1, p2 ≤ 48

Economics Nov 18, 2020

In the Bertrand model with product differentiation, suppose that the two Bertrand firms face the following symmetric demand curves:
q1 = 96 - 2p1+1/2 p2
q2 = 96 - 2p2 + 1/2p1
where q1, q2 ≥ 0 and p1, p2 ≤ 48. MC for both firms is 12.

-Is product differentiation more or less significant in this example than in the example given in the text in Equations 10.3A and 10.3B? Why? ?qB?=96−2pB?+pH?? 10.3A
?qH?=96−2pH?+pB?? 10.3B

-2. Find the Bertrand equilibrium.