What is the optimal defection from the collusive agreement

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Reference no: EM131195998

An industry consists of two ?rms. The demand function for the product of ?rm i is qi =24−5pi +2pj. The marginal cost of production for each ?rm is zero. (a) Find the price best-response function for ?rm i. (b) Assume the ?rms compete over prices once; ?nd the Nash equilibrium in prices. (c) Find the collusive prices. (d) Draw a diagram that illustrates parts (a) through (c). (e) What are collusive pro?ts? Bertrand pro?ts? (f) What is the optimal defection from the collusive agreement?

Reference no: EM131195998

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