Economics · Oligopoly and Bertrand Paradox
The Bertrand paradox (two firms suffice for competitive outcome) is resolved by which of the following modifications? Select ALL that apply: I. Introducing capacity constraints (Edgeworth cycles) II. Allowing product differentiation III. Considering infinitely repeated interaction with a sufficiently high discount factor IV. Assuming decreasing returns to scale in production V. Introducing consumer switching costs
- 1II, IV and V only
- 2I, III and V only
- 3I, II, III and V only✓
- 4I, II and III only
Correct answer
I, II, III and V only
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