Consider two identical firms competing as Cournot oligopolists in a market with demand p(Q)=100-0.5Q. Both firms...

Consider two identical firms competing as Cournot oligopolists in a market with demand p(Q)=100-0.5Q. Both firms have total costs,TC=10q where 10 is the marginal cost of production. ( Here Q represents total output in the market whereas q represents firm level output.)

(b) Now assume that the firms collude. They again play a one-shot game. What is the output that each firm should produce in order to sustain the collusion? Find the market price, and profits of each firm. Are their profits higher when they collude than when they compete as Cournot oligopolists?

Expert Solution

Rahul Sunny answered 8 months ago

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