Describe the corresponding equilibrium strategies, Macroeconomics

Only two identical firms i = A;B, each with marginal cost MCi = 40 and no fixed cost, operate in a market with demand:

Q     p

1    160

2    120

3     90

4     70

5     50

6    40

(a) Suppose that the firms select simultaneously the quantities they wish to produce. Obtain the normal form (payout table) representation of this game and determine the Nash equilibria (Cournot solution). Also obtain the collusive allocations, in which firms maximize joint profits, and the socially efficient allocations.

(b) Suppose that the firms meet again one more time in the future, selecting their quantities simultaneously in each period (as in part (a)) but observing each others first period choices before the second period market takes place. Which is the perfect equilibrium of the corresponding twice repeated game? What if they interact repeatedly for ten periods? Explain.

(c) Suppose that the firms continue to interact indefinitely over time; having at each period a probability equal to 0:75 of meeting again for at least one more period. Can the collusive solution be supported as a Nash equilibrium of this repeated game? If so, describe the corresponding equilibrium strategies.

Posted Date: 3/22/2013 6:40:26 AM | Location : United States







Related Discussions:- Describe the corresponding equilibrium strategies, Assignment Help, Ask Question on Describe the corresponding equilibrium strategies, Get Answer, Expert's Help, Describe the corresponding equilibrium strategies Discussions

Write discussion on Describe the corresponding equilibrium strategies
Your posts are moderated
Related Questions
(Consumer Price Index)Given the following data, what was the value of the consumer price index in the base year? Calculate the annual rate of consumer price inflation in 2013 in ea

In "Kitchen Nightmares", Chef Gordon Ramsa visits struggling restaurants and gives the owners of the restaurant a number of recommendations intended to reverse the restaurant's pro


While referring to the "EYE on YOUR LIFE" section on page 235 of the textbook, and the economic concepts you have accumulated during our course, consider the trade policies that se

trying to figure out how this works as I have two classes currently statistics/economics an

A restaurant/bar is analyzing its pricing of beer. It has determined that the price elasticity of demand for beer is 0.8, the cross-price elasticity for wine with respect to the pr

RELATIONSHIP WITH 8 VARIANTS OF NATIONAL PRODUCT AGGREGATES  We have shown the distinction between national product at market prices and national product at factor cost, based

Mathematical Presentation: Consider the utility function U = U(x 1 , x 2 ). Differentiating totally, we get the following: dU = U 1 dx 1 + U 2 dx 2 = 0 (as along the indiffe

how to get full marks in a drawing of ppc diagrams

Thread less is an example of a firm building on its customer base to use new products and also to participate in the design and vetting of popular designs. In the summer of 2010, D