In an oligopolistic market, firm i and firm j have constant marginal cost = c for an identical good. They compete to set prices Pi and Pj. The demand for total market demand Q, where if $P_i P_j$ , the demand for firm i is 0. If $P_i

Question

In an oligopolistic market, firm i and firm j have constant marginal cost = c for an identical good. They compete to set prices Pi and Pj. The demand for total market demand Q, where if $P_i > P_j$ , the demand for firm i is 0. If  $P_i < P_j$ , the demand for firm i is Q. If  $P_₁ = P_j$ , then they share the market equally and hence the demand for firm i is  $\frac{Q}{2}$ . In equilibrium, the prices of firms i and j are:

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In equilibrium, both firms will set their prices equal to each other and equal to the marginal cost, as charging above the marginal cost would reduce their demand to zero, and charging below would incur losses. Thus, the equilibrium price will be equal to the marginal cost for both firms. Hence, the correct answer is (d) .

Answer

$P_i > P_₁ = c$

Answer

$P_i > P_j > c$

Answer

$P_i < P_j < c$

Answer

$P_i = P_j = c$

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The Correct Option is D

Solution and Explanation

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