Determine the nash equilibrium output per firm

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Reference no: EM132210280

Question: A market is served by three identical firms, each with the cost function ci(qi) = 600qi The firms produce homogeneous products. The demand for the good is Q(P) = 3000 âˆ' P Firms choose quantities simultaneously, and the market determines the price, as in the standard Cournot model.

a. Determine the Nash equilibrium output per firm, market price, and profit per firm in the one-shot setting.

b. Determine the quantity each firm produces, the price, and profit per firm if the firms are able to collude.

c. Suppose two of the firms decide to collude, but the third decides to defect. Determine the output of the defecting firm, the resulting price, and the profit the defector makes.

d. Suppose the market meets an infinite number of times and firms discount their profits based on the interest rate r. Determine the maximum interest rate at which the grim trigger strategy can support a collusive Nash equilibrium.

Reference no: EM132210280

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