How does the alpha required to sustain tacit collusion in equilibrium vary with n? In other words, how does concentration influence the stability of tacit collusion? HINT: You will first need to figure out what would constitute collusion and defection in this model! You already know that the "punishment" outcome is the n-firm Cournot equilibrium derived in Lecture 3: Cournot Oligopoly 1. Figure out the rest of the elements of t ?

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In the context of tacit collusion in an oligopoly firms engage in strategic behavior to coordinate their actions and maintain higher prices and profit... View the full answer