Does fluctuating demand facilitate collusion?, Financial Accounting

Assignment Help:

We consider two identical firms that produce the same good. The demand for that good is the function D(p) = 1 - p where p is the unit price. Firms incur no cost.

The competition game (simultaneous pricing competition) is repeated infinitely. The discount factor is δ.

We consider the following strategy for each firm:

At period t, firm i :

(i) sets the monopoly price if firm 2 sets the monopoly price at all the previous periods.

(ii) sets a price equal to 0 otherwise

1. What is the condition on δ that ensures that setting the monopoly price at each period is an equilibrium of the dynamic game?

We introduce fluctuations in the market demand. At each period the demand is, with equal probability, either 0 or 2(1 - p).

2. What is the new condition on δ that makes collusion on the monopoly price stable?


Related Discussions:- Does fluctuating demand facilitate collusion?

Primary restriction of making demand, Q. Primary restriction of making dema...

Q. Primary restriction of making demand? The primary restriction of making demand forecasts lies in the fact that they are forecasts and hence their reliability is unknown. Mos

Prepare a post-closing trial balance, As a recently hired accountant for a ...

As a recently hired accountant for a small business, Bearing, Inc., you are provided with last year's balance sheet, income statement, and post-closing trial balance to familiarize

Prepare the income statement and balance sheet, Below is the Trial Balance ...

Below is the Trial Balance for Clay Employment Services, year ending December 31, 2011.  Previous period's information were as follows: net receivables, $290,000 and inventory, $82

HELP!!, Calculate the DuPont Model, given the following information: cash=$...

Calculate the DuPont Model, given the following information: cash=$16,080; accounts receivable= $9,500; prepaid = $3,150; supplies =$675; equipment =$25,200; accumulated depreciati

Whats the company''s return on investments?, Sales= 4,500,000 Min required ...

Sales= 4,500,000 Min required return= 15% Avg Operating assets= 1,800,00 Residual Income= 90,000 !) Whats the company's return on investments? Please show work so I can see how

Risk and return - issue of debt, Q. Risk and Return - issue of debt? Ra...

Q. Risk and Return - issue of debt? Raising debt finance will raise the gearing and the financial risk of the company while raising equity finance will lower gearing and financ

Please explain why, The following data has been taken from the management a...

The following data has been taken from the management accounting reports from Spinnaker Sales. Div A -Income from operations $1,800,000 Total service department charges $1,600,000.

How many shares remain after the repurchase, 3:Barnes Baskets, Inc. (BB) cu...

3:Barnes Baskets, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is

INTANGIBLE ASSETS, Baruch Lev, who is a professor of accounting at New York...

Baruch Lev, who is a professor of accounting at New York University and a globally known academic for his research on financial reporting for intangibles, is that the economy has c

Rules of intestacy-no spouse and no children, The intestate leaves no spous...

The intestate leaves no spouse and no children The net estate devolves as follows: to his Father; or if dead Mother; or if dead Brothers and sisters, and any child o

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd