Firm 1 and Firm 2 compete in the same product market by setting quantities q₁ and 92,respectively. They have the same marginal cost c₁ = C₂ = 40. The market demand isp=1240 Q, where Q = 91 +92.19. Suppose the game is played for one period. What are the equilibrium quantities?(a) q₁ =1000, 92 1000(b) q₁ = 800, q2 = 800(c) 91 = 600, q2 = 600(d) 9₁ = 400, q2 = 400(e) 9₁ = 200, q2 = 200In questions 19-21, suppose that this game is repeated for infinitely many periods. Firmshave the same discount rate 8. Consider the situation in which the two firms are tryingto implement a collusion scheme. With this intent, they employ the following grim-triggerstrategy: in the first period, each firm produces the collusion quantity; from period twoonwards, the firm keep producing the collusion quantity as long as no firm has ever pro-duced any quantity other than the collusion quantity; otherwise, the firm plays the NashEquilibrium of the stage game.As you will see, what varies from one question to another is the collusion quantity thateach firm is supposed to produce.QM20. Let QM be the joint quantity (that is, the sum of 9₁ and 92) that maximizes the jointprofits of Firms 1 and 2. Consider a collusive scheme in which each firm producesWhat is the range of discount rates & such that this collusion scheme can be sustainedin an SPNE of the repeated game, assuming that the players follow the grim-triggerstrategy described above? The options display numbers rounded to two decimal places.(a) 8 ≥ 0.48(b) ≥ 0.53(c) ≥ 0.63(d) 8 > 0.42(e) ≥ 0.58 21. Again, let QM be the joint quantity that maximizes the joint profits of Firms 1 and 2.Consider a collusive scheme in which Firm 1 produces 55% of QM and Firm 2 produces45% of QM. What is the range of discount rates d such that this collusion scheme canbe sustained in an SPNE of the repeated game, assuming that the players follow thegrim-trigger strategy described above? The options display numbers rounded to twodecimal places.(a)≥ 0.44(b)≥ 0.32(c) ≥ 0.56(d) 8 ≥ 0.93(e) 8≥ 0.6622. Once more, let QM be the joint quantity that maximizes the joint profits of Firms 1 and2, and consider a collusive scheme in which each firm produces . But now assumethat the firms have a limit to their production capacity. Specifically, the maximumquantity that each firm is able to produce in any given period is 420. What is the rangeof discount rates & such that this collusion scheme can be sustained in an SPNE of therepeated game, assuming that the players follow the grim-trigger strategy describedabove? The options display numbers rounded to two decimal places.(a) 8 ≥ 0.46(b) ≥ 0.52(c) ≥ 0.58(d) 8 ≥ 0.74(e) 8 ≥ 0.65

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Firm 1 and Firm 2 compete in the same product market by setting quantities 9₁ and 92, respectively. They have the same marginal cost C₁ C₂ = 40. The market demand is p=1240-Q, where Q = 9₁ +92- 19. Suppose the game is played for one period. What are the equilibrium quantities? (a) qi 1000, 921000 (b) q₁ = 800, 92 = 800 (c) 91 = 600, 92 = 600 (d) q₁ = 400, 92 = 400 (e) 91 = 200, 92 = 200

Firm 1 and Firm 2 compete in the same product market by setting quantities 9₁ and 92, respectively. They have the same marginal cost C₁ C₂ = 40. The market demand is p=1240-Q, where Q = 9₁ +92- 19. Suppose the game is played for one period. What are the equilibrium quantities? (a) qi 1000, 921000 (b) q₁ = 800, 92 = 800 (c) 91 = 600, 92 = 600 (d) q₁ = 400, 92 = 400 (e) 91 = 200, 92 = 200

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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