An industry consists of two firms with identical costs C(q) = 4+2q. The market demand is...

 

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An industry consists of two firms with identical costs C(q) = 4+2q. The market demand is given by Q = 20- P, where P, Q stands for the market price and market demand respectively. Two firms compete in an infinitely repeated Cournot game Let p be the probability of continuation to the next period, and 8 be the discount factor. Consider the following trigger strategy: Cooperate as long as the partner cooperates in the previous periods. Punish forever by deviating to non-cooperative act if the partner deviates in the previous round. Find the payoff from honoring the agreement (collusion). (5%) b. Find the payoff from deviating from the agreement (deviation). (5%) a. C. Find the conditions under which collusion is stable. (10%) Activate V Go to Setting An industry consists of two firms with identical costs C(q) = 4+2q. The market demand is given by Q = 20- P, where P, Q stands for the market price and market demand respectively. Two firms compete in an infinitely repeated Cournot game Let p be the probability of continuation to the next period, and 8 be the discount factor. Consider the following trigger strategy: Cooperate as long as the partner cooperates in the previous periods. Punish forever by deviating to non-cooperative act if the partner deviates in the previous round. Find the payoff from honoring the agreement (collusion). (5%) b. Find the payoff from deviating from the agreement (deviation). (5%) a. C. Find the conditions under which collusion is stable. (10%) Activate V Go to Setting

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To analyze the stability of collusion in the infinitely repeated Cournot game with the given trigger strategy lets go through each step a Payoff from ... View the full answer