Clearly, as y increases( the products are leas differentiated), the individual and aggregate quantity produced, the prices, and the profits all decline Proposition 7.1 In a cournot game with differentiated products, the profits offirms increase when the products become more differentiated It can explain why firms tend to spend large sums of money to advertise their brands
• Clearly, as γ increases (the products are leas differentiated), the individual and aggregate quantity produced, the prices, and the profits all decline. Proposition 7.1 In a Cournot game with differentiated products, the profits of firms increase when the products become more differentiated. • It can explain why firms tend to spend large sums of money to advertise their brands
Non Address approach Bertrand Competition If firms compete in price using the direct demand functions given in(7. 2), each firm i takes pi as given and chooses pi to maximize its profit mx7(P1,P2)=(a-b+q);j=1,2i≠j(76) The first-order conditions are given by 0=额=a-2;+ yielding bests-response functions given by Pi=R(pi) 26 i,=1,2,≠ (77
Non Address approach Bertrand Competition • If firms compete in price, using the direct demand functions given in (7.2), each firm i takes pj as given and chooses pi to maximize its profit • The first-order conditions are given by • yielding bests-response functions given by