Please help with these two: 1. Consider a Duopoly model, in which two firms decide a quantity simultaneously. If they collude (setting the total quantity together), then each firm can earn (higher, or lower) profit than in the Cournot equilibrium. 2. Consider a collusion with two firms. The joint profit is maximized by setting quantity and price together. Each firm sells the agreed amount. However, believing that the other firm sells the agreed amount, there is always a temptation for the firm sell (more, or less) than the agreed amount.
Please help with these two: 1. Consider a Duopoly model, in which two firms decide a quantity simultaneously. If they collude (setting the total quantity together), then each firm can earn (higher, or lower) profit than in the Cournot equilibrium. 2. Consider a collusion with two firms. The joint profit is maximized by setting quantity and price together. Each firm sells the agreed amount. However, believing that the other firm sells the agreed amount, there is always a temptation for the firm sell (more, or less) than the agreed amount.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please help with these two:
1. Consider a Duopoly model, in which two firms decide a quantity simultaneously. If they collude (setting the total quantity together), then each firm can earn (higher, or lower) profit than in the Cournot equilibrium.
2. Consider a collusion with two firms. The joint profit is maximized by setting quantity and price together. Each firm sells the agreed amount. However, believing that the other firm sells the agreed amount, there is always a temptation for the firm sell (more, or less) than the agreed amount.
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