A certain rural village has numerous small farms which raise livestock. There are two large and equally sized landowners, Jimmy and Bob, which produce hay for the farmers’ animals. Below is the daily village demand for hay Suppose, for simplicity, that Jimmy and Bob have the same constant cost structure, so maximizing total revenue maximizes profit. If Jimmy and Bob initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium? Jimmy and Bob will each earn a daily profit of $625. Jimmy will earn a daily profit of $700 and Bob will earn a daily profit of $500. Bob will earn a daily profit of $700 and Jimmy will earn a daily profit of $500. Jimmy and Bob will each earn a daily profit of $525.
A certain rural village has numerous small farms which raise livestock. There are two large and equally sized landowners, Jimmy and Bob, which produce hay for the farmers’ animals. Below is the daily village demand for hay
Suppose, for simplicity, that Jimmy and Bob have the same constant cost structure, so maximizing total revenue maximizes profit. If Jimmy and Bob initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium?
|
Jimmy and Bob will each earn a daily profit of $625. |
||
|
Jimmy will earn a daily profit of $700 and Bob will earn a daily profit of $500. |
||
|
Bob will earn a daily profit of $700 and Jimmy will earn a daily profit of $500. |
||
|
Jimmy and Bob will each earn a daily profit of $525. |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
