A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals]. A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pЄ [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul- taneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1/2. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals].
A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals]. A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pЄ [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul- taneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1/2. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals].
Chapter15: Oligopoly And Strategic Behavior
Section: Chapter Questions
Problem 7P
Related questions
Question
![A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel
receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now
consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a
probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and
imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at
the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium
exists in which both firms do not self-report [maximum two decimals].
A competition authority introduces the following leniency program. The first firm to come
forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other
convicted cartel members pay the full fine of F. Now consider an industry in which two
firms have formed a cartel. The cartel has stopped its activities. However, there is still
a probability pЄ [0, 1] that, in the absence of any leniency application, the competition
authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul-
taneously choose whether to report or not. If both firms apply at the same time, each is
getting the fine reduction with probability 1/2.
Give the highest value of p for which an equilibrium exists in which both firms do not
self-report [maximum two decimals].](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F06626787-9cb4-4222-bb27-39dcf42cb6cc%2F542dc42a-1620-4f14-a4fd-2405ad9e5eeb%2Fbouk24k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel
receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now
consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a
probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and
imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at
the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium
exists in which both firms do not self-report [maximum two decimals].
A competition authority introduces the following leniency program. The first firm to come
forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other
convicted cartel members pay the full fine of F. Now consider an industry in which two
firms have formed a cartel. The cartel has stopped its activities. However, there is still
a probability pЄ [0, 1] that, in the absence of any leniency application, the competition
authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul-
taneously choose whether to report or not. If both firms apply at the same time, each is
getting the fine reduction with probability 1/2.
Give the highest value of p for which an equilibrium exists in which both firms do not
self-report [maximum two decimals].
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