They both sell identical products, so it's the same type of ice cream that both

of these sellers are stocking. The game is played a single time, so

there's one day on which both players, both ice cream manufacturers or sellers are

on the beach. And they try to sell their ice cream so

it's price setting but it's just once. You'll have market transparency, so

consumers know both prices, so everyone knows the prices that

both firms will set. And there's infinite price elasticity,

which means that no matter what the price difference is, the seller with the

lower price will get all the consumers, okay?

There also, finally, there are no capacity constraints.

Which means that each of the sellers can produce or can stock or can replenish

endless amounts of ice cream.

So, if we just take these assumptions. Two companies, price competition,

identical products played once with full market transparency, with infinite price

elasticity, and there are no capacity constraints, then we can think of

analyzing this game pretty much as a game

as we did in the five lectures previously.

So, each seller can set a low price or a high price.

So, that's if we have competition between these two players

that just have two possible options. And, if we just take the simplest

assumption here, we've got seller A and seller B, and they can set either high

prices or low prices. What we find is that if both

firms charge the same prices, then they both share the market equally.