Bertrand theorem

Okay kiddo, do you know what a market is? It's a place where people buy and sell things, like toys or candy. In the grown-up world, there are markets for things like cars, houses, and even groceries.

Now, imagine there are two people selling the same kind of toy in the same market. Let's say they are both selling teddy bears. They might try to compete with each other by lowering their prices to attract more customers. This is called price competition.

The Bertrand Theorem is a fancy idea that talks about this kind of competition. It says that if two sellers are selling identical products in a market, and they have the same costs, then they will end up setting the price for their product at the same level as each other.

You might be wondering why this is important. Well, if the sellers charge the same price, it means that they won't be able to attract more customers by lowering their price - because they will have the same price as their competitor. And if they try to raise their price too high, customers will just go to the other seller.

So, because of the Bertrand Theorem, we might see price competition being less intense in markets where there are only a few sellers selling exactly the same thing. It's like the sellers are in a tug-of-war, and they can't really pull the rope in either direction.

I hope that makes sense, buddy!