ECON 402 (ECON402)

ECON 402 HOMEWORK 5 Solution 1. This problem is related to the discussion of what happens in the Bertrand Competition model once we introduce capacity constraints (see Chapter 11). Consider a Bertrand, price-competition model between two _rms with capacity constraints. Suppose the market consists of 20 consumers, each of which will purchase one unit of the good. Suppose that each consumer is willing to pay at most $2:00 for the good. Suppose that each unit can be produced at a cost of $0:...