Author Question: Which alteration of the assumptions behind the Bertrand model can help avoid the Bertrand Paradox ... (Read 54 times)

123654777 · **on:** Jul 1, 2018

Which alteration of the assumptions behind the Bertrand model can help avoid the Bertrand Paradox (that an outcome resembling perfect competition may arise with even as few as two firms)?
a. assume firms have limited capacities.
b. assume firms produce differentiated rather than homogeneous products.
c. assume firms play repeatedly and thus may collude.
d. all of the above.

Question 2

Which game does the Cournot model most resemble and why?
a. the Battle of the Sexes because firms need to coordinate their outputs.
b. the Battle of the Sexes because firms disagree on which outcome is best.
c. the Prisoners Dilemma because firms don't maximize joint payoffs in equilibrium.
d. the Prisoners Dilemma because firms play dominant strategies.