Revert to the nash equilibrium

Assignment Help Business Economics
Reference no: EM136320

Q. Assume a duopoly and let demand be given by P=A-BQ. In addition, let both firms have the same marginal cost c. The interaction between the two firms will be repeated infinitely. Both firms play a grim trigger strategy: they collude and play the cooperative action upon which the firms have agreed (monopoly) as long as both firms always stick to the agreement. However, if any firm should deviate from the agreement then they will revert to the Nash equilibrium forever.
a) if firms collude, what is the profit of each firm?
b) suppose the firms compete in quantities. If firm 1 deviates from collusion in one period, what is the profit of firm 1 in that period in subsequent periods?
c) what condition must the discount factor satisfy for collusion to be sustained if the firms compete in quantities?
d) what condition must the discount factor satisfy for collusion toe be sustained if the firms compete in prices?

Reference no: EM136320

Questions Cloud

Congress authorizes a tariff on imported steel : The election of a new Congress causes consumer confidence to soar as expectations of future economic growth are solid.
Produce and sell electricity to the local electric utility : In 2020, Ahmed decides to invest in a wind turbine that would produce and sell electricity to the local electric utility. He decides to buy a smaller, used turbine.
The short-run and long-run effects : The short-run and long-run effects of this change for the levels of per-capita output, and the growth rates of (total) output and per-capita output.
Foundation for modern economic growth : When and where did modern economic growth first happen. What are the major institutional factors that form the foundation for modern economic growth. What do they have in common.
Revert to the nash equilibrium : Suppose the firms compete in quantities. If firm 1 deviates from collusion in one period, what is the profit of firm 1 in that period in subsequent periods.
Bureau of labor statistics classify : If you are near graduation and plan to start your new job in 3 weeks, how does the Bureau of labor statistics classify you? Unemployed, employed or notin labor force.
Symmetric demand function : Two firms are located on the line and sell identical products. Consumers obtain K utility from consuming a product; assume that K is large enough that all consumers purchase from at least one of the firms despite the costs of transportation.
Behaviors of consumers and suppliers : Explain the process of how that movement occurred using behaviors of consumers and suppliers. Graph the movement between the two points as well.
Circular flow relates to current economic situations : Explain a way that your family interactsin factor market and a way that it interactsin products market. Discuss how circular flow relates to current economic situations.

Reviews

Write a Review

Business Economics Questions & Answers

  Economics assignment

This document contains various important questions and their appropriate answers in the subject field of Economics.

  Demand and supply curves

Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.

  Long-run perfectly competitive equilibrium for the firm

Evaluate Government intervene and correct this situation?(a) Explain the concept of a concentration ratio. A rise in the price of magarine Explain the impact of external costs and external benefits on resource allocation long-run perfectly c..

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

  Case study: fisher-price toys

The case study of the Fisher-Price Toys, Inc., a popular case in basic economics and management from the prestigious Harvard Business School.

  Draw the production possibility curve

Draw the production possibility curve and a. Define consumer surplus and producer surplus.

  Tax revenue

The Australian government administers two programs that affect the market for cigarettes

  Maximize total welfare

How many tickets to sell to maximize total welfare.

  Difference between the cv and the ev

The change in consumer surplus (?CS) is not "theoretically" justifiable like the CV and EV but it continues to be the most widely used measure of consumer welfare change. Explain how this can be reconciled

  Depict von neumann-morgenstern utility index u in a diagram

Depict the von Neumann-Morgenstern utility index u in a diagram

  What is the market solution

What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution

  Calculate gross national product and net national product

Calculate gross national product and net national product

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd