Question: Suppose that demand is given by P = 130 Q and marginal cost equals 10. Firms are Cour not competitors and play a super game.

Suppose that demand is given by P = 130− Q and marginal cost equals 10. Firms are Cour not competitors and play a super game. The collusive agreement being considered is for each to produce half of the monopoly output. What is the critical discount factor to sustain collusion using grim punishment strategies if detection of deviation requires two periods?

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Market demand 130 Q Profit maximization yields cartel output Qm 130 102 60 Profits for the cartel ar... View full answer

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