Repeated Game and Collusion Consider two firms that are playing a Bertrand game at each stage of an infinitely repeated game. They have the same discount factor d < 1 and the same constant marginal cost c. If they co-operate in the stage game then they each produce half the monopoly quantity qm and sell at the monopoly price pm. (a) What strategies, based on a threat of charging c in the stage game, the collusive outcome? will produce (b) For what values of 6 do these strategies constitute a sub-game perfect Nash equi- librium?

Repeated Game and Collusion Consider two firms that are playing a Bertrand game at each stage of an infinitely repeated game. They have the same discount factor d < 1 and the same constant marginal cost c. If they co-operate in the stage game then they each produce half the monopoly quantity qm and sell at the monopoly price pm. (a) What strategies, based on a threat of charging c in the stage game, the collusive outcome? will produce (b) For what values of 6 do these strategies constitute a sub-game perfect Nash equi- librium?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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