Tourist-trap model The big question: Is a competitive price charged?(Recall in standard Bertrand where there is full information competitive price is charged- this is what the text book and in lass we call as the full information price equilibrium) Suppose all stores charge full-information competitive price, Pc This price is equilibrium price only if no seller wants to charge a different price No firm wants to sell for less than pe =marginal cost as it will result in a loss Suppose one firm charges pl-p+8, where a=small positive number just less than c In this case, a consumer still buys from it, so store makes a higher profit. Thus, competitive price cannot be equilibrium priceTourist-trap Model