00:01
So let's think about firm one's possible option, right? they can play a few different options, right? so the first thing is that they can put price less than marginal cost.
00:13
But if they do this, they lose money, right? so they probably don't want to play that.
00:19
They could also set price equal to marginal cost, at which point they break even, right? they break even because, you know, they're sort of setting the price equal to the marginal cost.
00:36
And so you have quantity greater than zero, right? the other option is price greater than marginal cost.
00:43
And my argument here is that we have to think about the response.
00:47
You might think that if they set price greater than marginal cost, they would make money.
00:53
But what you could imagine is that firm two would set p2 such that p1 is greater than p2 is greater than marginal cost.
01:10
So if they set price greater than marginal cost, firm two would react to sneak into the middle, right? whatever the gap between their price and marginal cost is, firm two prices in the middle...