Can firms sustain collusion using threat of nash equilibrium

Reference no: EM13212404

Consider the following infinitely repeated model between two firms. Each period, the firms earn profits of 10 if they successfully collude. If a firm deviates from the aggreement, it earns 15 in the period in which it cheats. In each period that the firms compete noncooperatively, they each earn profits of 8 (that is, each firm earns a profit of 8 each period from playing the one-shot non-cooperative Nash equilibrium). Let it be the discount factor of each firm. For what values of ? can the firms sustain collusion, using the threat of non-cooperative Nash equilibrium play every period forever as punishment? (it is insufficient to simply insert numbers into a formula you have memorized).

Reference no: EM13212404

Questions Cloud

Indicate the increase in demand for us farm goods : Suppose you are the Prime Minister of India and your country is experiencing a widespread famine. As a humanitarian response to the crisis, the US Congress enacts the following incentive programs; (1) The US government will impose a temporary lega..

Define what is the boiling point of the solutions : What is the boiling point (in ?C) of each of the solutions below? For water, Kb = 0.51(?C ? kg)/mol. The vapor pressure of water at 45.0?C is 71.93mm Hg.

How does cindys decision affect total surplus in whoville : The many identical residents of whoville love drinking zlurp. Each resident has the following willingness to pay for the tasty refreshment: first bottle-$5 second bottle-$4 third bottle-$3 fourth bottle-$2 fifth bottle-$1 further bottles-$0.

Explain how many moles of atp can be derived : phosphenolpryuvate how many moles of ATP can be derived just from reduced electron carriers (not substrate-level phosporylation?

Can firms sustain collusion using threat of nash equilibrium : Consider the following infinitely repeated model between two firms. Each period, the firms earn profits of 10 if they successfully collude. If a firm deviates from the aggreement, it earns 15 in the period in which it cheats. In each period that t..

Explain sodium hydroxide yields ethanol and sodium acetate : The hydrolysis of ethyl acetate (CH3COOC2H5) by sodium hydroxide yields ethanol (C2H5OH) and sodium acetate (NaO2CCH3) by the reaction shown

Explain and identify the carbon atom in the structure : Identify the carbon atom(s) in the structure shown that has (have) each of the following hybridizations.

Explain four methods you might use to estimate the price : A group of firms in an industry have been accused of engaging in price fixing in Edmonton, but not elsewhere. Describe and explain four methods you might use to estimate the price impact of the conspiracy.

Calculate the work transferred from the surroundings : Define your system to be the gas in the cylinder, and calculate the work transferred from the surroundings to the system from this expansion. Note that the pressure will change as the expansion takes place.

User Account

All Pages