16. Consider an infinitely repeated game where, in each round, two firms compete a la Bertrand in a market with inverse aggregate demand function p(q) = 300 – 2q. The firms have identical marginal costs, 20. What is the minimum discount factor 8 (if any) such that they can sustain the monopoly price by the "perfect Tit-for-Tat" strategy, defined as follows: • Choose the monopoly price in the first period • Choose the collusive price if either (a) both players played the monopoly price in the previous round; or (b) both players played price equal to marginal cost in the previous round • Choose price equal to marginal cost otherwise (a) 1/3 (b) 1/2 (c) 2/3 (d) 1 (e) None of the above options

16. Consider an infinitely repeated game where, in each round, two firms compete a la Bertrand in a market with inverse aggregate demand function p(q) = 300 – 2q. The firms have identical marginal costs, 20. What is the minimum discount factor 8 (if any) such that they can sustain the monopoly price by the "perfect Tit-for-Tat" strategy, defined as follows: • Choose the monopoly price in the first period • Choose the collusive price if either (a) both players played the monopoly price in the previous round; or (b) both players played price equal to marginal cost in the previous round • Choose price equal to marginal cost otherwise (a) 1/3 (b) 1/2 (c) 2/3 (d) 1 (e) None of the above options

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.6P

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