Question: please answer it in detail Suppose there are two rms producing a homogeneous good, each with a cost function given by C (q,) = 361,-,

please answer it in detail

Suppose there are two rms producing a homogeneous good, each with a cost function given by C (q,) = 361,-, i = 1, 2. Firms are playing an innitely repeated game, facing a market demand given by P(Q) = 150 Q, where Q = q1 + on. Both rms discount prots with a common discount factor 6 E [0, 1). a) (1 point) What is the total discounted prot for each rm, from following a collusive agreement? b) (1 point) Suppose both rms are considering collusion. If rm 1 decides to collude and rm 2 decides to cheat on the agreement, what is rm 2's prot for the period in which it cheats? (Hint: deriving best response functions for each rm will help both the current problem and the next problem) c) (1 point) Consider now a \"trigger\" strategy like the ones we saw in class. What is the total discounted prot associated with cheating? d) (1 point) What is the value of 5 such that both rms are indifferent between following the collusive agree- ment or cheating on it

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 Economics Questions!

During jury selection at his state court trial for aggravated murder and related offenses, the state used all 6 of their peremptory challenges to strike the only 6 black individuals from the jury....

Exercise 4: Collusion in prices Suppose there are three rms producing a homogeneous good, each with a cost function given by C ('15) = 4m, 1' = 1,2, 3. Firms are playing an infinitely,r repeated...

INDUSTRIAL ORGANIZATION AND ANTITRUST POLICY Econ class Reference - Modern Industrial Organization by Dennis W. Carlton and Jeffrey M. Perloff, 4th edition, 2015. Question 1 Consider an industry with...

Suppose there are two firms producing a homogeneous good, with cost functions given by C1(q1) = 3911 and C2(q2) = 2:12 + 6. Firms are playing an infinitely repeated game, facing a market demand given...

need help 3. (4 points) Consider an industry with N rms producing a homogeneous good. The inverse demand function is D (Q) = 100 C2"3 (3) where Q = 23:195. Moreover, for j = 1, ...,N, the total cost...

Please see the chart 13:13 BEEM015_2021MidTerm (1 of 2) Answer Both Questions "" """s are permitted.'l'hisis an open boolt exam. 2 of 2 thewppliedW/a 1] Suppose there are two rms selling a homogenous...

(Bertrand game with discrete prices and asymmetric costs) Consider two rms producing a homogeneous product. Let ql and (12 be the quantities produced by rm 1 and rm 2, respectively. Demand is given...

Please answer the following questions, Thanks! Problem 2. Suppose there are two rms producing spring water which is homo geneous; that is, consumers don't particularly like one over the other if the...

please answer all questions (if possible) in relation to the first paragraph. Assume that the cost function for a multiproduct firm is given by C(Q1, Q2), where Q1 is the number of units produced of...

Please help Suppose that the monopolist can produce a good with total cost TC = 240. Assume also that he monopolist sells its goods in two different markets separated by some distance. The demand...

PLEASE ANSWER BOTH PARTS AND SHOW EVERY STEP. THANK YOU!!! Part A (12 points) Suppose that the monopolist can produce a good with total cost TC = 240. Assume also that he monopolist sells its goods...

The breakdown performance of the mean and the median continues with their scale estimate counterparts. For a sample X1,..., Xn: (a) Show that the breakdown value of the sample variance S2 = (Xi) -...

How do your current financial position and goals relate to your creation of alternative financial plans?

If Purple Hedgehog Forestry Group reduces the amount of its forecasted capital budget, how will this affect the firm s annual dividend, assuming that all other factors are held constant? The amount...

One bond has a coupon rate of 8%, another coupon rate of 12%. Both bonds pay interest annually, have 10-year maturities, and sell at a yield to maturity of 10%. a. If their yields to maturity next...

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2014, were as follows: a. Issued 15,000 shares of $20 par common stock at $30, receiving cash. b....

Part of the assembly line will need adjusting if the consistency of the injected plastic becomes either too viscous or not viscous enough as compared with a value (56.00) your engineers consider...

At the beginning of its fiscal year, Caf Med leased restaurant space from Crescent Corporation under a nine-year lease agreement. The contract calls for annual lease payments of $25,000 each at the...

For the customers in Exercise 2, a) If the customers apply for the three cards according to the historical proportions, about how big, on average, would you expect the x2 statistic to be (what is the...

QUESTIONS: Have you done any computer programming in the past. If YES which language did you like the most and why. If NO, which languages would you like to learn and why. What are some objected...

2 What might make the culture difficult to change? Nomura, Japans largest investment bank, acquired Lehmans Asian, European and Middle Eastern operations in 2008. Some senior ex-Lehman employees left...

1 What were the main symbols of the culture before and after the change? Nomura, Japans largest investment bank, acquired Lehmans Asian, European and Middle Eastern operations in 2008. Some senior...

1 What were the main symbols of the culture before and after the change? RWE, the Essen- based power and water corporation (utility), is adapting to the forces of globalisation. Less than a decade...