Consider a "punishment" variation of the two-firm oligopoly situation shown in the figure below. Suppose that if one firm sets a low price while the other sets a high price, then the firm setting the high price can fine the firm setting the low price. Suppose that whenever a fine is imposed, X dollars are taken from the low-price firm and given to the high-price firm. RareAir's price strategy High Low $12 $15 A B High $12 $6 $6 $8 Low $15 $8 Instructions: Enter your answer as a whole number. What is the smallest amount that the fine X can be such that both firms will want to always set the high price? $O million Uptown's price strategy
Consider a "punishment" variation of the two-firm oligopoly situation shown in the figure below. Suppose that if one firm sets a low price while the other sets a high price, then the firm setting the high price can fine the firm setting the low price. Suppose that whenever a fine is imposed, X dollars are taken from the low-price firm and given to the high-price firm. RareAir's price strategy High Low $12 $15 A B High $12 $6 $6 $8 Low $15 $8 Instructions: Enter your answer as a whole number. What is the smallest amount that the fine X can be such that both firms will want to always set the high price? $O million Uptown's price strategy
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 18CTQ: When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that...
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Question
![Consider a "punishment" variation of the two-firm oligopoly situation shown in the figure
below. Suppose that if one firm sets a low price while the other sets a high price, then the
firm setting the high price can fine the firm setting the low price. Suppose that whenever a
fine is imposed, X dollars are taken from the low-price firm and given to the high-price
firm.
RareAir's price strategy
High
Low
$12
$15
A
B
High
$12
$6
$6
$8
Low
$15
$8
Instructions: Enter your answer as a whole number.
What is the smallest amount that the fine X can be such that both firms will want to
always set the high price?
$O million
Uptown's price strategy](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F52b7603e-1f0d-43b2-8b7b-3726cb0e5b78%2F667b46f1-2d42-436c-8786-9278daf5421e%2Fv8dqu2jd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a "punishment" variation of the two-firm oligopoly situation shown in the figure
below. Suppose that if one firm sets a low price while the other sets a high price, then the
firm setting the high price can fine the firm setting the low price. Suppose that whenever a
fine is imposed, X dollars are taken from the low-price firm and given to the high-price
firm.
RareAir's price strategy
High
Low
$12
$15
A
B
High
$12
$6
$6
$8
Low
$15
$8
Instructions: Enter your answer as a whole number.
What is the smallest amount that the fine X can be such that both firms will want to
always set the high price?
$O million
Uptown's price strategy
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