Make collusion at the monopoly price sustainable

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Suppose there was a Bertrand duopoly. Each firm produces the product at constant average (and marginal) cost $10, and the demand for the product is given by Q = 5000 ? 100P

(a) If the Bertrand game is played in a single period, how much will each firm charge?

(b) What is the monopoly price in this market?

(c) What value of would make collusion at the monopoly price sustainable?

(d) Suppose now N firms were in the market. What value of would make collusion at the monopoly price sustainable? (Hint: will depend on N)

(e) If N is large (e.g. N ? ?), will collusion be easy to maintain? What is the intuition behind this result?

 

Reference no: EM13692450

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