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For what values of the discount factor can grim punishment

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Suppose that demand is given by P = 130− Q and marginal cost equals 10. Firms are Bertrand competitors with unconstrained capacity and play a supergame.

(a) For what values of the discount factor can grim punishment strategies support an equal division of the monopoly output?

(b) Which type of competition—Bertrand or Cournot—is more likely to sustain the collusive agreement? Why?

Reference no: EM13323984

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