collusion_ans

collusion_ans - Problem set on Collusion 1. Collusion...

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is. True or False. Explain. of collusion discussed in class. so it increases the gains from deviation and reduces the cost of the punishment. This is like raising the discount factor R . 3. Collusion is more likely in industries where individual sales are large and take place ocassionaly than in industries where individual sales are small but frequent. True or False. Explain. Answer. False. If sales are large and take place ocassionaly, it is like in the previous question where the immediate gains from deviating are large and the punishment takes time to come. This makes collusion harder. 4. r = 1% ; c 1 = 5 ; c 2 = 0 ; demand function Q = 10 p: It is not possible to have collusion True or False. Explain. maximum it could ever get under collusion - it obviously will not be willing to share 5. The demand function is given by p = 100 Q and the constant marginal cost of produc- tion is denoted by c = 20 : and equally share the monopoly output. By deviating from this collusive agreement, a time and the interest rate is r: (a) If the rate of interest in this market is 10%, could you support cooperation at the monopoly level with trigger strategies? Answer. It can easily be checked that the monopoly price is 60 and total output ± 40 = 1600 =N = 100 : 1500 : The cost of deviating is 100 =r = 1000 < 1500 ; 1
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This note was uploaded on 10/15/2008 for the course ECON 171 taught by Professor Hopenhayn during the Spring '07 term at UCLA.

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collusion_ans - Problem set on Collusion 1. Collusion...

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