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Unformatted text preview: Suggested Solutions to PS 6 I. True, False or Uncertain. Explain . No credit given without explanation. Use graphs or algebra to help explain your answer whenever possible (2 points each). 1) Collusion is more likely in a repeated game. Answer: True. First, a firm can signal to other firms that it wishes to cooperate in one period, which could lead to collusion in subsequent periods. Second, one firm can punish another firm for not restricting output. The threat of punishment makes collusion more likely. 2) A firm that practises multi market price discrimination will set the lower price in the market that has the most elastic demand. Answer: True. For a multimarket discriminating monopolist, there must be differences in price elasticity of demand between markets which means there must be a different price elasticity of demand from each group of consumers. The firm is then able to charge a higher price to the group with a more price inelastic demand (since they cannot substitute to a different product) and a relatively lower price to the group with a more elastic demand. By adopting such a strategy, the firm can increase its with a more elastic demand....
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This note was uploaded on 11/14/2009 for the course PAM 2000 taught by Professor Evans,t. during the Spring '07 term at Cornell University (Engineering School).
- Spring '07