What is the single period cournot equilibrium

Reference no: EM13238350

In a market with annual demand Q = 100 -P there are two firms, A and B, who make identical products. Marginal costs are constant and equal 10. There are no capacity constraints.

a. What is the single period cournot equilibrium? What level of output (or equiva- lently, which collusive price) maximizes joint profits?

b. Suppose A and B form a collusive agreement in which both agree to produce the collusive level of output in period t as long as the collusive level of output was produced in period t -1. If a given firm cheats in period t -1, the other Örm will produce the cournot level of output for T periods. What is the mininum T that will ensure cheating does not occur?

Reference no: EM13238350

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