Exercise #2. Suppose the short-term equilibrium corresponds to theCournot equilibrium with two firms, 1 and 2, facing the inversedemand P10-41-92 and incurring a constant marginal cost c =C2 = 2.A) Determine the monopoly profit and assume it is split equallyamong the two firms.Assume firm 1 deviates from the collusive outcome. T.(9, 9) T(,)B) Determine the output and profit for both firms during the deviationperiod.C) Determine the punishment output and profit for both firms, whichcorrespond to the output and profit for both firms at the Cournotequilibrium.D) Determine the discount rate that makes collusion sustainableassuming both fims adopta trigger strategy.}

Cournot model- model was developed in 1838 by french economist Augustin Cournot. it is a duopoly…

Exercise #2. Suppose the short-term equilibrium corresponds to the Cournot equilibrium with two firms, 1 and 2, facing the inverse demand P = 10-91- 92 and incurring a constant marginal cost c = C2 = 2. A) Determine the monopoly profit and assume it is split equally among the two firms. Assume firm 1 deviates from the collusive outcome. T,(a, ) E(9 B) Determine the output and profit for both firms during the deviation ? period. C) Determine the punishment output and profit for both firms, which correspond to the output and profit for both firms at the Cournot equilibrium.

Exercise #2. Suppose the short-term equilibrium corresponds to the Cournot equilibrium with two firms, 1 and 2, facing the inverse demand P = 10-91- 92 and incurring a constant marginal cost c = C2 = 2. A) Determine the monopoly profit and assume it is split equally among the two firms. Assume firm 1 deviates from the collusive outcome. T,(a, ) E(9 B) Determine the output and profit for both firms during the deviation ? period. C) Determine the punishment output and profit for both firms, which correspond to the output and profit for both firms at the Cournot equilibrium.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.1P

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