Consider the following (modified) game from the Supporting Collusion with Trigger Strategies in Action from lecture: Firm
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Consider the following (modified) game from the "Supporting Collusion with Trigger Strategies in Action" from lecture:
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Firm A Firm B Strategy Low price High price Low price 5,0 -40, 80 High price 75,-40 25, 20 Answer the following: a. What is the Nash equilibrium of this game if it is played only once? b. What is the highest interest rate that sustains collusion for firm A (playing a trigger strategy)? c. What is the highest interest rate that sustains collusion for firm B (playing a trigger strategy)? d. What explains the difference in these interest rates? (intuition here) Firm A Firm B Strategy Low price High price Low price 5,0 -40, 80 High price 75,-40 25, 20 Answer the following: a. What is the Nash equilibrium of this game if it is played only once? b. What is the highest interest rate that sustains collusion for firm A (playing a trigger strategy)? c. What is the highest interest rate that sustains collusion for firm B (playing a trigger strategy)? d. What explains the difference in these interest rates? (intuition here)
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a The Nash equilibrium of this game if it is played only on... View the full answer
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