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In Bertrand model, the firms' total profit level is higher than that in a Cournot model
In Bertrand model, the firms' total profit level is higher than that in a Cournot model. False O True The difference between a Bertrand model and a Cournot model is that in a Bertrand model, each firm chooses the quantity to produce, but in a Cournot model, each firm chooses the price to post. O True False
Expert Solution
1. In Bertrand model, firms generally set relatively lower price and sell relatively larger output level than cournot model due to which Bertrand model gives relatively lower profit to the firms than that of cournot model. Hence, the given statement is false.
2. Bertrand model is used to describe the market situation where firms are liable to set their price and make pricing decision in the market. In contrast, the cournot model is developed to describe the market situation when firms simultaneously decide their output level at the market price. Hence, the given statement is false.
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