Question
1) The market demand for a good is Q=120p in each of an infinite number of periods. There are two firms with zero average costs.
1) The market demand for a good is Q=120p in each of an infinite number of periods. There are two firms with zero average costs. The discount factor is 0.9.(Answer format is one numeric value.)
a)What is the present value of the profit earned by each firm if they collude?
b) What is the present value of the profit earned by each firm if they engage in Bertrand competition?
c) What is the present value of the profit earned by each firm if they engage in Cournot competition?
d) What is the net benefit from cheating if trigger strategies assume setting P=MC forever?
e) If the discount factor was 0.3 instead of 0.9, what would be the net benefit from cheating if trigger strategies assume setting P=MC forever?
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