3.1 The state of Connecticut sets a maximum fee that bail-bond businesses can charge for posting a given-size bond (Ayres and Waldfogel, 1994).

The bail-bond fee is set at virtually the maximum amount allowed by law in cities with only one active firm (Plainville, 99% of the maximum;

Stamford, 99%; and Wallingford, 99%). The price is as high in cities with a duopoly (Ansonia, 99.6%;

Meriden, 98%; and New London, 98%). However, in cities with 3 or more firms, the price falls well below the maximum permitted price. The fees are only 54% of the maximum in Norwalk with 3 firms, 64% in New Haven with 8 firms, and 78%

in Bridgeport with 10 firms. Give possible explanations based on the Cournot model for this pattern.