Firm 1 and Firm 2 are in a duopoly, earning each annual profits of £10 million per year. Firm 1 could earn £20 million p
Posted: Thu May 19, 2022 7:57 am
Firm 1 and Firm 2 are in a duopoly, earning each annual profits
of £10 million per year. Firm 1 could earn £20 million per year as
a monopolist. Firm 1 drops its price to £40 when its marginal cost
is £50 and holds it there for a year to be able to drive Firm 2 out
of the market.
The year that it drops its price, Firm 1 will lose £10 million.
At what level of interest rate i will the strategy of Firm 1 be
profitable?
of £10 million per year. Firm 1 could earn £20 million per year as
a monopolist. Firm 1 drops its price to £40 when its marginal cost
is £50 and holds it there for a year to be able to drive Firm 2 out
of the market.
The year that it drops its price, Firm 1 will lose £10 million.
At what level of interest rate i will the strategy of Firm 1 be
profitable?