(8) For each situation, solve whether collusion is sustainable using “trigger strategy" (infinitely repeated) NOTE: For each of these exercises, you need to calculate { 7. collusion > cheat > punished and see if the incentive compatibility inequality (condition for collusion to occur as a Nash equilibrium) is satisfied. 8a) Stage Game is Bertrand with Homogeneous Product; cost same as before but overall demand is Q(P) = 375 – 15 P and given & = 0.9 8b) Same as 4a) but given 8 = 0.5 8c) Stage Game is Cournot; Joe and Sarah have a constant MC P(Q) = 20 – 0.1 × Q where Q = Qjoe + Qsarah and given 8 = 0.9 8d) Same as 4c) above but given 8 = 0.5
(8) For each situation, solve whether collusion is sustainable using “trigger strategy" (infinitely repeated) NOTE: For each of these exercises, you need to calculate { 7. collusion > cheat > punished and see if the incentive compatibility inequality (condition for collusion to occur as a Nash equilibrium) is satisfied. 8a) Stage Game is Bertrand with Homogeneous Product; cost same as before but overall demand is Q(P) = 375 – 15 P and given & = 0.9 8b) Same as 4a) but given 8 = 0.5 8c) Stage Game is Cournot; Joe and Sarah have a constant MC P(Q) = 20 – 0.1 × Q where Q = Qjoe + Qsarah and given 8 = 0.9 8d) Same as 4c) above but given 8 = 0.5
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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D and E
Transcribed Image Text:(8) For each situation, solve whether collusion is sustainable using "trigger
strategy" (infinitely repeated)
NOTE: For each of these exercises, you need to calculate { t collusion >
´cheat>
punished }
and see if the incentive compatibility inequality (condition for collusion to occur as a
Nash equilibrium) is satisfied.
8a) Stage Game is Bertrand with Homogeneous Product; cost same as before but
overall demand is
Q(P) = 375 – 15 P and given & = 0.9
8b) Same as 4a) but given 8 = 0.5
8c) Stage Game is Cournot; Joe and Sarah have a constant MC
P(Q) = 20 – 0.1 × Q where Q = Qjoe + Qsarah and given & = 0.9
8d) Same as 4c) above but given 8 = 0.5
8e) Try 4c) and 4d) assuming Sarah's MC = $5 but Joe's MC = $8. They both collude
on Sarah's Monopoly Output.
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