Repeated Game and Collusion Consider two firms that are playing a Bertrand game at each stage of an infinitely repeated game. They have the same discount factor d < 1 and the same constant marginal cost c. If they co-operate in the stage game then they each produce half the monopoly quantity qm and sell at the monopoly price pm. (a) What strategies, based on a threat of charging c in the stage game, the collusive outcome? will produce (b) For what values of 6 do these strategies constitute a sub-game perfect Nash equi- librium?
Repeated Game and Collusion Consider two firms that are playing a Bertrand game at each stage of an infinitely repeated game. They have the same discount factor d < 1 and the same constant marginal cost c. If they co-operate in the stage game then they each produce half the monopoly quantity qm and sell at the monopoly price pm. (a) What strategies, based on a threat of charging c in the stage game, the collusive outcome? will produce (b) For what values of 6 do these strategies constitute a sub-game perfect Nash equi- librium?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.6P
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