There Are Two Firms in the Residential Paint Industry, Cool

question 108

Essay

There are two firms in the residential paint industry, Cool Shades (C)and Warm Hues (W).They collude to share the market equally.They jointly set a monopoly price and split the quantity demanded at that price.Here are their options:
i.They continue to collude (no cheating)and make $36 million each in profits.
ii.One firm cheats and the other does not.The firm that cheats makes a profit of $42 million whereas the firm that doesn't makes a profit of $27 million.
iii.They both cheat and each firm makes a profit of $21 million.
a.Construct a payoff matrix for these two firms.
b.How does this situation relate to the prisoner's dilemma?
c.If each firm acted noncooperatively, how much profit would each make?
d.Are the firms better off colluding (with no cheating)or competing? Explain.

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Definitions:

Computer Transcription

The process of using software to automatically convert spoken language into written text, often utilized for generating transcripts of audio or video recordings.

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A field of artificial intelligence that trains computers to interpret and understand the visual world, using digital images from cameras and videos and deep learning models.

Turing Test

A measure of a machine's ability to exhibit intelligent behavior equivalent to, or indistinguishable from, that of a human.