(Solved): Two internet providers, Bombast and Horizon, compete in the same town. The market includes 60,000 ho ...
Two internet providers, Bombast and Horizon, compete in the same town. The market includes 60,000 households that are potential users, and since all of them need internet service, the market is fixed in size. Bombast and Horizon each spent
$15million to develop their networks; serving a user costs
$25per month. Which price will the firms charge in the Nash equilibrium of the Bertrand duopoly game, and how much profit or loss will they have made after the first year? They will each charge
$75per subscribed household and make
$12million in profit. They will each charge
$25per subscribed household and lose
$15million. They will each charge
$100per subscribed household and make
$57million in profit. They will each charge
$50per subscribed household and break even.
