The DOJ is investigating allegations of collusion in the snowplow industry. Demand for snowplows is given by the inverse demand curve P = 35-5Q There are 3 identical Firms in the snowplow industry. Each firm has a cost function given by C (Q) = 5Q, (so, MC = 5) and has a discount factor of 0.6 a.)Suppose that these firms compete a la Bertrand in this market (simultaneous price setting). What will prices and quantities be? b) Suppose that these firms act as a Monopoly Cartel, with grim trigger punishments after defection. What will be the cartel price, and is this Cartel stable? c) Now suppose that two firms, SnowKing, and Mr. Plow, merge. What is the effect
The DOJ is investigating allegations of collusion in the snowplow industry. Demand
for snowplows is given by the inverse demand curve
P = 35-5Q
There are 3 identical Firms in the snowplow industry. Each firm has a cost function
given by C (Q) = 5Q, (so, MC = 5) and has a discount factor of 0.6
a.)Suppose that these firms compete a la Bertrand in this market (simultaneous
price setting). What will prices and quantities be?
b) Suppose that these firms act as a
c) Now suppose that two firms, SnowKing, and Mr. Plow, merge. What is the effect
of this merger, both if firms do not collude, and if they might?
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