Why the equilibrium number of firms is more responsive

Reference no: EM13237855

Consider a market in which there are N identical buyers who each demand qb = a - P units and thus that market demand is given by Q = N(a - P). Each firm has constant marginal cost equal to c and fixed cost equal to F. Use the conjectural variation model to solve for the free entry number of firms as a function of a, c, N, F and v (the conjectural variation term). Show that the equilibrium number of firms (n) is more responsive to increases in industry size (N) when firms act more collusively (i.e. when v is higher).

Reference no: EM13237855

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