Suppose Two Firms, FastNet and SmartCast Are the Only Fast

question 230

Multiple Choice

Suppose two firms, FastNet and SmartCast are the only fast Internet providers in a city. They have identical costs and one firm's service is a perfect substitute for the other's. The industry is a natural duopoly. Suppose that FastNet and SmartCast collude and agree to share the market equally.
-In the scenario above, in Nash equilibrium:

• A) Both firms cheat to produce more than the agreed amount.
• B) Both firms comply with the agreement.
• C) One firm complies with the agreement while the other cheats to produce more than the agreed amount.
• D) Both firms cheat to produce less than the agreed amount.

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