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Suppose that there are three firms, who produce homogeneous products, and whom have the same marginal cost which is constant over output. These firms play an infinitely repeated Bertrand pricing game. Each period they simultaneously set prices. One period monopoly profits are given by ?M. Firms 1 and 2 have discount factors of 0.8, while Firm 3 has a discount factor of 0.6. (a) Supposing that when the three firms set the same price they share the market evenly, demonstrate that collusion at the monopoly price is not sustainable, using the Bertrand Nash Equilibrium of marginal cost pricing forever as the punishment strategy. Explain and show your work. (b)Suppose now that when all three firms set the same price, they do not share the market equally. Rather, when all three firms set the same price, Firms 1 and 2 each get a share of the market equal to ?<1/3; Firm 3's market share is 1 - 2 ?, which is bigger than 1/3. It is still the case that when a firm undercuts the others, it serves the entire market. Are there any values of ? for which collusion is now sustainable using the Bertrand Nash Equilibrium of marginal cost pricing forever as the punishment strategy?
illustrate the U.S. wholesale market for roses. Show on the graph the equilibrium in that market with no international trade and the equilibrium with free trade. Mark on the graph the quantity of roses produced in the United States
Imagine you are a consultant hired to give advice to a fast food restaurant which is faced with employees asking for a 25% increase in pay. In order to give good advice, you need more information. Create three to four (3-4) questions that you woul..
Mr. Wayne, CFO, provides you with the following information based on experience and management policy. All sales are credit sales and are billed the last day of the month of sale. Customers paying within 10 days of the billing date may take a 2 pe..
Suppose that when a hotel charges $50 per night, 200 rooms are rented and when they charge $75 per room, 150 rooms are rented. Assuming a linear relationship between x, the number of rooms rented and y, the price charged per room.
How should the food be allocated if they want to maximise their use/utility If person no. 2 needs a utilitylevel of at least 5 to survive, how should the food be allocated if they still want to maximise their use, without letting person no. 2 die.
Where Qt represents the quantity of widgets sold per period t, Pt represents the price of widgets during period t, and Mt represents average household income of customers during period t. You are also given the following information about the regre..
In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all taxi rides are the same distance and therefore cost the same. The accompanying table shows the demand a..
A Man is planning to retire in 20 years. He can deposit money for his retirement at 6% compounded monthly. It is estimated that the future general inflation rate will be 5% compounded annually. What deposit must be made each month..
The following numbers measure the tradeoff between grades and income: Total Hours Hours Hours Studying GPA Working Income 60 60 4.0 0 $ 0 60 40 3.0 20 $100 60 30 2.0 30 $150 60 10 1.0 50 $250 60 0 0.0 60 $300 Total Hours Hours Hours Studying GPA
A University Employee using the Illinois Self Managed Retirement Plan retires at age 67 with 4 million dollars in his retirement account. If the employee will live 13 years in retirement and earn 4.5% interest on his account balance.
A professor's rule of thumb is that students should spend 2 hours studying for each 1 hour spent in class. Professor Bob teaches a class that meets 3 hours per week. He randomly selects 8 students and finds that they study the following amounts pe..
Solve Tracy's problem of how often to go to the ATM when nominal interest rate on her bank account is 10%, she spends $30 each day, it cost her $0.50 each time she uses the atm, and she thinks that there is a 15% chance.
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