16. Consider an infinitely repeated game where, in each round, two firms compete a la Bertrand in a market with inverse aggregate demand function p(q) = 300 – 2q. The firms have identical marginal costs, 20. What is the minimum discount factor 8 (if any) such that they can sustain the monopoly price by the "perfect Tit-for-Tat" strategy, defined as follows: • Choose the monopoly price in the first period • Choose the collusive price if either (a) both players played the monopoly price in the previous round; or (b) both players played price equal to marginal cost in the previous round • Choose price equal to marginal cost otherwise (a) 1/3 (b) 1/2 (c) 2/3 (d) 1 (e) None of the above options
16. Consider an infinitely repeated game where, in each round, two firms compete a la Bertrand in a market with inverse aggregate demand function p(q) = 300 – 2q. The firms have identical marginal costs, 20. What is the minimum discount factor 8 (if any) such that they can sustain the monopoly price by the "perfect Tit-for-Tat" strategy, defined as follows: • Choose the monopoly price in the first period • Choose the collusive price if either (a) both players played the monopoly price in the previous round; or (b) both players played price equal to marginal cost in the previous round • Choose price equal to marginal cost otherwise (a) 1/3 (b) 1/2 (c) 2/3 (d) 1 (e) None of the above options
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.6P
Related questions
Question
![16. Consider an infinitely repeated game where, in each round, two firms compete a la
Bertrand in a market with inverse aggregate demand function p(q) = 300 – 2q. The
firms have identical marginal costs, 20. What is the minimum discount factor 8 (if any)
such that they can sustain the monopoly price by the "perfect Tit-for-Tat" strategy,
defined as follows:
• Choose the monopoly price in the first period
• Choose the collusive price if either (a) both players played the monopoly price in
the previous round; or (b) both players played price equal to marginal cost in the
previous round
• Choose price equal to marginal cost otherwise
(а) 1/3
(b) 1/2
(c) 2/3
(d) 1
(e) None of the above options](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F86a68482-9e1f-42d2-a559-c7d4fb09e576%2F14a9f36b-7080-44f1-94c7-7ad25ab63645%2Frgfpaed_processed.png&w=3840&q=75)
Transcribed Image Text:16. Consider an infinitely repeated game where, in each round, two firms compete a la
Bertrand in a market with inverse aggregate demand function p(q) = 300 – 2q. The
firms have identical marginal costs, 20. What is the minimum discount factor 8 (if any)
such that they can sustain the monopoly price by the "perfect Tit-for-Tat" strategy,
defined as follows:
• Choose the monopoly price in the first period
• Choose the collusive price if either (a) both players played the monopoly price in
the previous round; or (b) both players played price equal to marginal cost in the
previous round
• Choose price equal to marginal cost otherwise
(а) 1/3
(b) 1/2
(c) 2/3
(d) 1
(e) None of the above options
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