8. Suppose there are two identical firms in an industry who compete by settingquantities. The output of firm 1 is denoted by q1 and that of firm 2 is denotedby q2. Each firm faces a constant marginal cost of 3. Let Q denote total output,1.e. Qq1 +42. The inverse demand curve in the market is given byP-15-Q(d) Suppose firms interact repeatedly over an infinite horizon, and firms havea common discount factor & € (0,1). Specify a trigger strategy for eachfirm to sustain the collusive arrangement as an equilibrium outcome. Cal-culate the minimum value of & for which such a trigger strategycollusion as an equilibrium in the repeated interaction.ain

The market demand function: P=15-Q There are only two firms in the market, firm 1 produces…

Suppose firms interact repeatedly over an infinite horizon, and firms have a common discount factor & € (0,1). Specify a trigger strategy for each firm to sustain the collusive arrangement as an equilibrium outcome. Cal- culate the minimum value of & for which such a trigger strategy collusion as an equilibrium in the repeated interaction. air

Suppose firms interact repeatedly over an infinite horizon, and firms have a common discount factor & € (0,1). Specify a trigger strategy for each firm to sustain the collusive arrangement as an equilibrium outcome. Cal- culate the minimum value of & for which such a trigger strategy collusion as an equilibrium in the repeated interaction. air

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a duopolistic market in which the two identical firms compete by selecting their quantities. The inverse market demand is P(Q) = 210−Q and each firm has a marginal cost of $15 per unit. Assume that fixed costs are negligible for both firms. Cournot Model Determine the Nash-Cournot equilibrium for this market.(Enter your responses rounded to two decimal places.) Firm 1's quantity: q1= ? units. Firm 2's quantity: q2 = ? units. Market price: P= ? Stackelberg Model Determine the Nash-Stackelberg equilibrium for this market, assuming that Firm 1 is the Stackelberg leader. (Enter your responses rounded to two decimal places.) Firm 1's quantity: q1 = ? units Firm 2s quantity: q2 = ? units. Market price: P = ?
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