Identify the truthfulness of the following statements.
I. Cournot competitors behave less aggressively than Bertrand competitors because a Cournot firm cannot expect to "steal" customers from a rival whereas a Bertrand firm can.
II. Two firms are enough to replicate perfectly competitive outcomes in a Bertrand market, whereas a Cournot market only approaches perfectly competitive outcomes when the number of competitors becomes large.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Question

Identify the truthfulness of the following statements. 
I. Cournot competitors behave less aggressively than Bertrand competitors because a Cournot firm cannot expect to "steal" customers from a rival whereas a Bertrand firm can.
II. Two firms are enough to replicate perfectly competitive outcomes in a Bertrand market, whereas a Cournot market only approaches perfectly competitive outcomes when the number of competitors becomes large.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Quizplus · Accepted Answer

Cournot competitors focus on quantities and do not aggressively cut prices to steal customers, unlike Bertrand competitors who compete on prices. In a Bertrand market, even with two firms, prices can be driven down to marginal cost, replicating perfect competition, whereas Cournot markets require many firms to achieve similar outcomes.

Identify the Truthfulness of the Following Statements