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Find the minimum industry output that is sustainable

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Suppose that demand is given by P = A - Q and marginal costs are constant and equal to zero. Assume that there are two firms that are Cournot competitors, and punishments are grim.

(a) As a function of the discount factor, find the minimum industry output that is sustainable- assuming the two firms agree to produce the same amount.

(b) As the discount factor increases, what happens to the extent of collusion or the exercise of market power? Why?

Reference no: EM13874831

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