Two gas stations next to each other set prices simultaneousl…
Two gas stations next to each other set prices simultaneously. They both compete in price non-cooperatively (i.e., no tacit collusion). Both stations have a marginal cost of $2 per gallon of gas. The gasoline in this market is a homogeneous good. No travel costs exist for the consumers, so all consumers in the market will buy from whichever gas station sets the lowest price. If the gas stations set the same price, the gas stations divide the number of customers evenly among them. This game is played once and then the world ends. We denote the price of gasoline per gallon station A and B charges as p_A and p_B, respectively. The demand for retail gasoline is given by Q = 100 – P, where P is the lowest price among two stations (i.e., P = min(p_A, p_B)). Given the product is homogeneous, what would be the Bertrand equilibrium price in this market?
Read DetailsHistorically, Samsung has produced the screen for Apple’s iP…
Historically, Samsung has produced the screen for Apple’s iPhone. Arguably, this makes both firms better off – Samsung can produce screens, some of which they use on their own devices, at a lower cost per unit and Apple gets a cheaper display. This is likely the result of:
Read Details