Make collusion at the monopoly price sustainable

Reference no: EM13692450

Suppose there was a Bertrand duopoly. Each firm produces the product at constant average (and marginal) cost $10, and the demand for the product is given by Q = 5000 ? 100P

(a) If the Bertrand game is played in a single period, how much will each firm charge?

(b) What is the monopoly price in this market?

(d) Suppose now N firms were in the market. What value of would make collusion at the monopoly price sustainable? (Hint: will depend on N)

(e) If N is large (e.g. N ? ?), will collusion be easy to maintain? What is the intuition behind this result?

Reference no: EM13692450

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