In: Economics
PROBLEM VIII. Suppose that, in a market of a certain good, there are two firms that are engaged in an infinitely repeated Cournot competition. In each period, the inverse demand function is given by P(Q) = 200 − 4Q, where Q is the total supply of the good. Firm i (i = 1, 2) has the same cost function C(qi) = 8qi and the same discount factor δ, where 0 < δ < 1.
Q20. What is the Cournot equilibrium profit for each firm? (a) 861. (b) 1422. (c) 968. (d) 1024. (e) 798.
Q21. What is the collusive profit for each firm? (a) 1152. (b) 1328. (c) 1224. (d) 1720. (e) 1352.
Q22. What is the defection profit for a deviating firm? (a) 1664. (b) 921. (c) 1082. (d) 1752. (e) 1296.