Consider a punishment variation of the two firm oligopoly situation shown in Figure 13.3 in the
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Consider a “punishment” variation of the two ‐ firm oligopoly situation shown in Figure 13.3 in the chapter. Suppose that if one firm sets a low price while the other sets a high price, then the firm setting the high price can fine the firm setting the low price. Suppose that whenever a fine is imposed, X dollars is taken from the low ‐ price firm and given to the high ‐ price firm. What is the smallest amount that the fine X can be such that both firms will want to always set the high price?
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Microeconomics Principles, Problems and Policies
ISBN: 978-1259450242
20th edition
Authors: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn
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