The following question has three parts. Part I. Consider two firms each producing a version of a differentiated good and facing the following system of demands: Pi = a -bqi dq;, i, j= 1, 2, i ‡ j where a=84, b=21, d=12. Assume firms marginal costs are equal to zero. Firms compete for an infinite number of periods. Suppose that firms compete as Cournot oligopolists. What is the minimum discount factor necessary to sustain collusion using grim-trigger strategies? [Report your answer with three decimals of precision.]

The following question has three parts. Part I. Consider two firms each producing a version of a differentiated good and facing the following system of demands: Pi = a -bqi dq;, i, j= 1, 2, i ‡ j where a=84, b=21, d=12. Assume firms marginal costs are equal to zero. Firms compete for an infinite number of periods. Suppose that firms compete as Cournot oligopolists. What is the minimum discount factor necessary to sustain collusion using grim-trigger strategies? [Report your answer with three decimals of precision.]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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