In the previous post, we covered Cournot Duopolies, where firms compete by setting quantities. But what happens if two firms compete instead by setting prices?
That’s exactly what we see in this classic clip from I Love Lucy, where two competing burger franchises are set right next to each other.
The Bertrand equilibrium predicts that the prices will drop to the cost of production. Watch the clip for the rationale and to see if that happens in I Love Lucy!