An industry has a demand function of QD(p) = 500 – 250p. Suppose now that each firm has a constant marginal cost equal to 1. a. If there are n identical firms, what would be the profit of each under Cournot competition? p. What would be the profit of each if they collude? c. If the firms face that demand function each period, what discount factor is required to support collusion? d. What happens to the required discount factor as n grows? |
An industry has a demand function of QD(p) = 500 – 250p. Suppose now that each firm has a constant marginal cost equal to 1. a. If there are n identical firms, what would be the profit of each under Cournot competition? p. What would be the profit of each if they collude? c. If the firms face that demand function each period, what discount factor is required to support collusion? d. What happens to the required discount factor as n grows? |
Chapter15: Oligopoly And Strategic Behavior
Section: Chapter Questions
Problem 12P
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Question
![An industry has a demand function of QP(p) =
500 – 250p. Suppose now that each firm has
a constant marginal cost equal to 1.
a. If there are n identical firms, what would be
the profit of each under Cournot competition?
5. What would be the profit of each if they
collude?
c. If the firms face that demand function each
period, what discount factor is required to
support collusion?
d. What happens to the required discount factor
as n grows?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F97a01a9b-818e-4a25-8a3c-629434059ba0%2Fa034a170-9e79-4597-b5e3-cc24d019ce01%2Ft4pvgsb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:An industry has a demand function of QP(p) =
500 – 250p. Suppose now that each firm has
a constant marginal cost equal to 1.
a. If there are n identical firms, what would be
the profit of each under Cournot competition?
5. What would be the profit of each if they
collude?
c. If the firms face that demand function each
period, what discount factor is required to
support collusion?
d. What happens to the required discount factor
as n grows?
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