Question: Economic question 2. Suppose that two rms compete in quantities (Gourmet) in a market in which demand is P = 180 Q. Each rm has

Economic question

2. Suppose that two rms compete in quantities (Gourmet) in a market in which demand is P = 180 Q. Each rm has no xed cost and a marginal cost of 10. (a) What is the one period Nash equilibrium output, price and prots? (b) What is the output of each rm if they collude to produce the monopoly output? What prot does each rm make in this arrangement? (c) If one rm decides to cheat on the collusive agreement, assuming the other rm still produces half the monopoly quantity, how much will the cheating rm pro- duce? What will be the industry price and prots of the two rms? (d) Suppose that the game is repeated indenitely. Find a pair of trigger strategies which can support collusive agreement. How high does the discount factor have to be for this to work

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