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Now suppose instead that rest of world fringe supply is given by: P = 150 + 0.60. Suppose that Saudi Arabia and Iran are again
Now suppose instead that rest of world fringe supply is given by: P = 150 + 0.60. Suppose that Saudi Arabia and Iran are again contemplating forming a Cournot duopoly cartel. (Hint: assume residual demand reflects case 1). g. What is the optimal amount of crude oil that Saudi Arabia, Iran, and the rest of the world produces? h. What is the equilibrium price of crude oil in the market? i. What is the mark-up charged by Saudi Arabia and Iran? j. What are the profits to Saudi Arabia and Iran? k. What is the share of Saudi Arabia's production to total duopoly production? 1. How does the Cournot mark-ups compare to the full enforcement (multi-plant monopoly consisting of Saudi Arabia and Iran) mark-ups? m. Compare your results for these two cases. What insights might this question have for the OPEC strategy game
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