Two Firms Produce Identical Products at Zero Cost, and They

question 131

Essay

Two firms produce identical products at zero cost, and they compete by setting prices.If each firm charges a low price, the both firms earn profits of zero.If each firm charges a high price, then each firm earns profits of $30.if one firm charges a high price and the other firm charges a low price, the firm that charges the lowest price earns profits of $50 and the firm charging the highest price earns profits of zero.
a.Which oligopoly model best describes this situation?
b.Write this game in normal form.
c.Suppose the game is infinitely repeated.Can the players sustain the "collusive outcome" as a Nash equilibrium if the interest rate if 50 percent? Explain.

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Definitions:

Objectivity Concept

A concept of accounting that requires accounting records and the data reported in financial statements to be based on objective evidence.

American Red Cross

A humanitarian organization that provides emergency assistance, disaster relief, and education within the United States.

Accounting Records

Documents and books that systematically record all financial transactions of an entity.

Personal Records

Personal records are documents or files pertaining to an individual's private life, including personal identification, financial accounts, health records, and employment details.