There are 2 firms in the 3D printer market. The demand curve for 3D printers is Q=400-4P, where Q is the total market demand. Each firm i’s cost is 10qi, where qi is the quantity for firm i.

1. If firms conduct Cournot competition, what would be the price, total output, and profit per firm?
2. If the two firms collude, what would be the price, total output, and profit per firm assuming they do not engage in price discrimination?
3. Suppose the colluding firms are producing equal quantities, and one firm decides to produce more (i.e. cheat). If the firm 1 assumes that firm 2 will continue to produce the collusive quantity, how much should firm 1 produce? What will the profit per firm? (Note, the profits here do have decimal points.)
4. Use the profits that you computed to fill in the payoffs in this game.

Transcribed Image Text:

Firm 2 Collude Cournot Best Response Firm 1 Collude Cournot Best Response Firm 2 Collude Cournot Best Response Firm 1 Collude Cournot Best Response

Answer rating: 100% (QA)

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