At the beginning of each year, Barnes Carr Oil sets the world oil price. If a price p is set, then D(p) barrels of oil during any year, each oil company sells the same number of barrels of oil. It costs Barnes Carr Oil c dollars to extract and refine each barrel of oil. Barnes Carr cannot set too high a price, however, because if a price p is set and there are currently N oil companies, then g(p, N) oil companies will enter the oil business [g(p, N) could be negative].

Setting too high a price will dilute future profits because of the entrance of new companies. Barnes Carr wants to maximize the discounted profit the company will earn over the next 20 years. Formulate a recursion that will aid Barnes Carr in meeting its goal. Initially, there are 10 oil companies.

Answer rating: 100% (QA)

Step 1 of 4 Barnes Carr Oil sets price pas world oil price then Dp barrels of oil will be demanded b... View the full answer