Question
Collusion Pricing and Output I'm trying to calculate output and price for Oligopoly firms in collusion. I get up to a point, but then I
Collusion Pricing and Output
I'm trying to calculate output and price for Oligopoly firms in collusion. I get up to a point, but then I get stuck.
For example, consider P(yT) = 24 - yT where c1(y1) = y12 & c2(y2) = y22
I can see this yields the Total Profit Function:
(24-y1-y2)(y1 + y2)-y12 - y22
That gives the Marginal Revenue Functions for each Firm
MR = 24-4y1-2y2
MR = 24-2y1-4y2
This is as far as I can get. I assumed to get the quantity you just go the MR=MC route, but its not working for me and I tried substitution methods.
The output that maximizes the cartels profit is 4, but I'm not finding that number. This is from my notes and my professor seems to imply MR and setting y1=y2 gives you 4. Like I get both firms agree on a set output, but there must be something else.
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