08 Aug You are a small firm competing with many other small firms on a market with homogeneous goods.
You are a small firm competing with many other small firms on a market with homogeneous goods. From consumers’ perspective, products of all firms are identical (i.e., they are perfect substitutes). Consumers are also informed about each firm’s price and there are no transportation costs. Consequently, your competitors’ prices are stable and equal to $180k per unit.
You can produce up to 9 units (for production reasons), or choose to produce nothing. At (or below) the “standard” price of $180k, you know that you can sell all these 9 goods.
If you set a price p+ above $180k, you won’t sell anything: Indeed, as you have many competitors, we assume that customers who would have bought to you at $180k, will find one of your many competitors who is willing to sell them a good at a price below p+.
If you decide to be active in this market, what price will you charge?
