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ECON 361 - Suppose that Pepsi and Coke are competing

Question # 00621250
Subject: Economics
Due on: 11/24/2017
Posted On: 11/24/2017 05:11 AM

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Suppose that Pepsi and Coke are competing in a horizon-

tally differentiated Bertrand market and setting prices.

The demand curves are as follows:

Qc = 40-5Pc + 4Pp

Qc = 100-2Pp + Pc

Coke face marginal cost MCc = 12 and Pepsi faces

marginal cost MCp = 8.

(a) Write the equation for the demand for coke in terms

of price Pc as a function of Pp and Qc.

(b) Determine the marginal revenue for Coke as a func-

tion of Pp and Qc.

(c) Find the equation that tells how much Coke would

produce for any price Pp using the above.

(d) Find the reaction function for Coke (Pc as a func-

tion of Pp ) using your answer above.

(e) Find the reaction function for Pepsi.

(f) Determine the Bertrand equilibrium.

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ECON 361 - Suppose that Pepsi and Coke are competing

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