Firms compete in quantities, and choose quantities simultaneously, if Cournot competition between the two firms is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Firms compete in quantities, and choose quantities simultaneously, if Cournot competition between the two firms is repeated infinitely many times, the grim-trigger strategy consists in reverting to the Nash equilibrium of the one-shot game forever following a deviation. Given demand function, p(Q) = a-bQ, Q = q1 +q2. Total cost for firm 1 is cq1²/2, Total cost for firm 2 is cq2²/2 1. What is the cartel profit? 2. What is the deviation profit? 3. What is the critical discount factor to sustain the collusion using grim punishment strategy? 4. Explain the impact of c on the critical discount factor. Firms compete in quantities, and choose quantities simultaneously, if Cournot competition between the two firms is repeated infinitely many times, the grim-trigger strategy consists in reverting to the Nash equilibrium of the one-shot game forever following a deviation. Given demand function, p(Q) = a-bQ, Q = q1 +q2. Total cost for firm 1 is cq1²/2, Total cost for firm 2 is cq2²/2 1. What is the cartel profit? 2. What is the deviation profit? 3. What is the critical discount factor to sustain the collusion using grim punishment strategy? 4. Explain the impact of c on the critical discount factor.
Expert Answer:
Answer rating: 100% (QA)
we have two firms q1 and q2 PQ Market price PQ abQ Q Industry su... View the full answer
Related Book For
Posted Date:
Students also viewed these mathematics questions
-
Two firms compete in a Cournot fashion. Firm 1 successfully engages in an activity that raises its rivals marginal cost of production. a. Provide two examples of activities that might raise rivals...
-
Two firms compete by choosing price. Their demand functions are Q 1 = 20 - P 1 + P 2 and Q 2 = 20 + P 1 - P 2 where P 1 and P 2 are the prices charged by each firm, respectively, and Q 1 and Q 2 are...
-
Factor A Factor B 1 2 3 4 Xj for Factor B 1 2 3 4 1 2500 2 9 10 6 9 8500 3 14 11 16 12 13250 Xi for Factor A 8333 8000 9000 7333 X8083
-
Explain incremental cash flow, externality? Why is timing of cash flows important? What is scenario analysis? Would a project's NPV for a firm be higher or lower if the firm used accelerated rather...
-
Air at 27C and 5 atm is throttled by a valve to 1 atm. If the valve is adiabatic and the change in kinetic energy is negligible, the exit temperature of air will be (a) 10C (b) 15C (c) 20C (d) 23C...
-
Using the summary statistics provided in Exercise 11, researchers calculated a 95% confidence interval for the mean difference between Walmart and Target purchase amounts. The interval was (14.15, ...
-
The two wires are connected together at A. If the force P causes point A to be displaced horizontally 2 mm, determine the normal strain developed in each wire. C 300 mm 30 B 300 mm 30 A -P
-
The Italian Bread Company purchased land as a factory site for $ 70,000. An old building on the property was demolished, and construction began on a new building. Costs incurred during the first year...
-
Explore the application of advanced fluid dynamics concepts in aerodynamics and hydrodynamics, analyzing the principles of lift, drag, and thrust, and discussing the design and optimization of...
-
a) Draw on a single well-labelled diagram, two cases to show how optimal allocation changes when Angela is a slave and when Angela is a tenant on the land owned by Bruno. (10 marks) b) Suppose Angela...
-
Design a combinational circuit that divides a 2-bit number A = (a ao) by another 2- bit number B= (b bo) and generates a 2-bit number D = (d do) that gives the remainder of the division (i.e. D =...
-
Shlee Corporation issued a 4-year, 60,000, zero-interest-bearing note to Garcia Company on January 1, 2015, and received cash of 60,000. In addition, Shlee agreed to sell merchandise to Garcia at an...
-
On January 1, 2015, McLean Company makes the two following acquisitions. 1. Purchases land having a fair value of 300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount...
-
The differences between the book basis and tax basis of the assets and liabilities of Morgan Corporation at the end of 2015 are presented below. It is estimated that the litigation liability will be...
-
On January 1, 2015, Durdil Co. borrowed and received 500,000 from a major customer evidenced by a zero-interest-bearing note due in 3 years. As consideration for the zero-interest-bearing feature,...
-
Flynn Inc. has two temporary differences at the end of 2015. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Flynns accounting...
-
When the chief executive officer of RADYON company refuses the auditor access to minutes of board of directors' meeting?
-
Suppose that fraction used = / 1.0 + 0.1Mt. for some parameter 1. Write the discrete-time dynamical system and solve for the equilibrium. Sketch a graph of the equilibrium as a function of ....
-
The ACME Corporation determines that at current prices the demand for its computer chips has a price elasticity of -2 in the short run, while the price elasticity for its disk drives is -1. a) If the...
-
Jon is always willing to trade one can of Coke for one can of Sprite, or one can of Sprite for one can of Coke. a. What can you say about Jons marginal rate of substitution? b. Draw a set of...
-
Using the data in the table, show what happens to the firms output choice and profit if the fixed cost of production increases from $100 to $150 and then to $200. Assume that the price of the output...
-
A construction contract differs from contracts that we generally deal with that focus on an easily defined physical object because the physical object can be examined. How is the object of a...
-
What does the owner contribute to the project and what does the contractor contribute to the project?
-
The construction schedule is the only project document that fully communicates the contractor's intentions for delivering the contracted scope of services over the full course of the project...
Study smarter with the SolutionInn App