Question: 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

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 Firms compete in quantities, and choose quantities simultaneously, if Cournot competition between , Total cost for firm 2 is the two firms is repeated infinitely many times, the grim-trigger strategy consists .

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.

cq222 cq222

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Question 3 (44 points): Market Interventions, Oligopoly and Collusion a. (8 points) Suppose the market for internet access is competitive. Market demand is given by P=9Q(P is in Dollars and Q is in...

Solve the following questions A duopoly faces inverse market demand of P (Q) = 120 Q, where Q is industry output, The two firms have a constant marginal cost of c = 30 and compete 'a la Cournot. a)...

Five star rating for only correct answers. (a) For the following stage game, check whether the strategy profile given (below) is a subgame- perfect equilibrium of the game in which the stage game is...

I need help with Question 1.B. I completed Question 1.A, which should be correct. However, my approach to 1.B seems wrong, because the answers (quantity, price, profit values) seem incorrect compared...

Consider a market with inverse demand PP(Q) = 50 Q, where Q denotes the quantity and P the price. The market is served by two firms, so that Q = q1 + 92. Both firms produce the good at constant...

Unigene Labs has existing assets that generate an EPS of $5 per year, which is expected to remain constant if the firm does not invest except to maintain exiting assets. Unigene is all-equity...

Attempt the following please; Univariate unconstrained maximization. (10 points) Consider the following maximization problem: max x f (x; x0) = exp((x x0)2) 1. Write down the first order conditions...

Q2 Consider the following demand function, p= 1-Q/2, Q = 91 +92, where qi denotes firm i's output, i=1,2. Assume that the marginal cost of each firm is equal to c> 0. Firms choose quantities...

According to the RUPA, a new partner is admitted to a partnership if a majority of the partners consent. TRUE OR FALSE Which of the following refers to the sale of the partnership's assets during the...

As a planner for BMW , Given the Quarter car sales for year 2018, 2019, 2020 and 2021, Find the Quarterly car sales for year 2022 If you know that the total sales for year 2022 will be 10% more than...

How we assess location and performance of solar energy system by PVSYST 7.1.

If Purchasing Policies are considered the "what" to critical activities of a Purchasing Organization, then this refers to the "how" critical activities are carried out. Multiple Choice Procedures...

3.95 Show that the probability of the union of events A and B can be written as follows: P1A

3.94 State, with evidence, whether each of the following claims is true or false: a. The conditional probability of A, given B, must be at least as large as the probability of A. b. An event must be...

3.90 Explain carefully the meaning of conditional probability. Why is this concept important in discussing the chance of an events occurrence?