Suppose firms A, B, and C set prices while facing per-period demand of Q = 200 - P, which yields a MR curve MR = 200 – 2Q for a monopolist. When setting prices non-cooperatively, the firms choose their prices simultaneously. All firms have MC = 20. The firms are currently involved in a cartel that sets the monopoly price and divides quantity evenly among the firms. The firms enforce their cartel arrangement with a grim trigger strategy. The Department of Justice (DOJ) has just started an antitrust division that is designed to break up cartels. The DOJ successfully detects and prosecutes a cartel with probability s, and prosecuted cartels receive the fine F and are prevented from ever colluding again. The firms believe that their interaction will continue forever (p = 1.0), and they discount future periods at R= 0.80. Which strategic variable are the firms choosing? What type of competition is this? O A. Quantity; Cournot O B. Quantity; Bertrand O C. Price; Cournot O D. Price; Bertrand I. II. What are the firms' per-period profits from: $ $. $ operating collusively and setting the monopoly price unilaterally defecting from the cartel choosing non-cooperative equilibrium prices III. In the absence of antitrust prosecution, are the three firms able to maintain a cartel while using the grim trigger strategy for the given R and p? O Yes O No
Suppose firms A, B, and C set prices while facing per-period demand of Q = 200 - P, which yields a MR curve MR = 200 – 2Q for a monopolist. When setting prices non-cooperatively, the firms choose their prices simultaneously. All firms have MC = 20. The firms are currently involved in a cartel that sets the monopoly price and divides quantity evenly among the firms. The firms enforce their cartel arrangement with a grim trigger strategy. The Department of Justice (DOJ) has just started an antitrust division that is designed to break up cartels. The DOJ successfully detects and prosecutes a cartel with probability s, and prosecuted cartels receive the fine F and are prevented from ever colluding again. The firms believe that their interaction will continue forever (p = 1.0), and they discount future periods at R= 0.80. Which strategic variable are the firms choosing? What type of competition is this? O A. Quantity; Cournot O B. Quantity; Bertrand O C. Price; Cournot O D. Price; Bertrand I. II. What are the firms' per-period profits from: $ $. $ operating collusively and setting the monopoly price unilaterally defecting from the cartel choosing non-cooperative equilibrium prices III. In the absence of antitrust prosecution, are the three firms able to maintain a cartel while using the grim trigger strategy for the given R and p? O Yes O No
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Suppose firms A, B, and C set prices while facing per-period demand of Q = 200 - P, which
yields a MR curve MR = 200 – 2Q for a monopolist. When setting prices non-cooperatively,
the firms choose their prices simultaneously. All firms have MC = 20. The firms are currently
involved in a cartel that sets the monopoly price and divides quantity evenly among the
firms. The firms enforce their cartel arrangement with a grim trigger strategy.
The Department of Justice (DOJ) has just started an antitrust division that is designed to
break up cartels. The DOJ successfully detects and prosecutes a cartel with probability s,
and prosecuted cartels receive the fine F and are prevented from ever colluding again.
The firms believe that their interaction will continue forever (p = 1.0), and they discount
future periods at R 0.80.
I.
Which strategic variable are the firms choosing? What type of competition is this?
O A. Quantity; Cournot
O B. Quantity; Bertrand
C. Price; Cournot
O D. Price; Bertrand
II.
What are the firms' per-period profits from:
$
$.
$
operating collusively and setting the monopoly price
unilaterally defecting from the cartel
choosing non-cooperative equilibrium prices
III.
In the absence of antitrust prosecution, are the three firms able to maintain a cartel
while using the grim trigger strategy for the given R and p?
O Yes
O No](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4b80beb3-7f20-4cd8-9570-8d0670fcd8d3%2F83f672a3-b55c-44b6-a4ef-835c1817802b%2F33oa788_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose firms A, B, and C set prices while facing per-period demand of Q = 200 - P, which
yields a MR curve MR = 200 – 2Q for a monopolist. When setting prices non-cooperatively,
the firms choose their prices simultaneously. All firms have MC = 20. The firms are currently
involved in a cartel that sets the monopoly price and divides quantity evenly among the
firms. The firms enforce their cartel arrangement with a grim trigger strategy.
The Department of Justice (DOJ) has just started an antitrust division that is designed to
break up cartels. The DOJ successfully detects and prosecutes a cartel with probability s,
and prosecuted cartels receive the fine F and are prevented from ever colluding again.
The firms believe that their interaction will continue forever (p = 1.0), and they discount
future periods at R 0.80.
I.
Which strategic variable are the firms choosing? What type of competition is this?
O A. Quantity; Cournot
O B. Quantity; Bertrand
C. Price; Cournot
O D. Price; Bertrand
II.
What are the firms' per-period profits from:
$
$.
$
operating collusively and setting the monopoly price
unilaterally defecting from the cartel
choosing non-cooperative equilibrium prices
III.
In the absence of antitrust prosecution, are the three firms able to maintain a cartel
while using the grim trigger strategy for the given R and p?
O Yes
O No
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education