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Please, Answer d - g. Two firms compete Cournot-style. Demand is p = 80-q, -92 and marginal cost is 8 for both firms. For parts
Please, Answer d - g.
Two firms compete Cournot-style. Demand is p = 80-q, -92 and marginal cost is 8 for both firms. For parts (a) and (b) we consider the static game where they play once to maximize individual firm profit. For parts (d) and onward, we use a discount factor 6, which is the same as from W+J. Given: a) Best Response Function for Each Firm: q1 = 36- 0.5q2 q2 = 36 - 0.5q1 b) Nash Equilibrium (NE) Quantities & Profit for an Individual Firm: NE: q1 = 24 q2 = 24 Profit: 1 = 576 712 = 576 c) Monopoly Quantity: Q =36 Cartel Quantity: q1 = 36 - q2 q2 = 36 - q1 Cartel Profit: 80q1 - q192-q12 + 80q2 - q192 - 8q1 - 8q2d. Suppose the duopoly game is repeated 100 times. Describe the outcome of the unique SPNE. e. Suppose the game is repeated indefinitely. Describe the grim trigger strategies that ensure both players play the cartel quantities go forever as a SPNE. f. What is the lowest o can be and support the equilibrium you described in the previous part? g. Suppose o = 0.5 (hint for above, too small). What is the lowest "semi-cartel" q = q* that can be supported by a grim trigger strategy? (Hint: It's messy; you will use the quadratic equation to get two critical values. Then eliminate the critical value that doesn't make sense.)Step by Step Solution
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