Determination for two firm cartel profit maximisation

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Reference no: EM131006015

The world's top for manufacturers on inexpensive random access memory chips, a key component of all consumer electronic devices, agreed to fines and jail term for several executive because of 1999-2002 price fixing. The criminal conspiracy raised prices 400 percent in a six-month period from US$4 per 100 megabits and then orchestrated maintaining the price at US$3. DRAM chip are generic and easily substitutable between supplier. As a result, a CARTEL agreement to limit production is necessary to maintain price above competitive level. SAMSUNG and HYNIX, two KOREA firms that produce the majority of the chips, paid US$300 million and US$185 million fines respectively. Infineon Technologies or Germany paid a US$160 million fine, and four executives went to jail for several months and paid individual fines of US$250 000. Micron Technology of Boise, Idaho, receiced immunity for cooperating with the prosecutors and complainants DELL and HP in making the case.

(1) Use a suitable diagram to explain the price-output determination for a TWO firm Cartel profit maximisation and the allocation of restricted output respectively.

Reference no: EM131006015

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