Assume That Demand for a Product That Is Produced at Zero

question 81

Short Answer

Assume that demand for a product that is produced at zero marginal cost is reflected in the table below.

a. What is the profit-maximizing level of production for a group of oligopolistic firms that operate as a cartel?
b. Assume that this market is characterized by a duopoly in which collusive agreements are illegal. What market price and quantity will be associated with a profit-maximizing Nash equilibrium?
c. Assume that this market is served by three identical firms who operate as independent oligopolists (no collusive agreements). What market price and quantity will be associated with a profit-maximizing Nash equilibrium? How does your answer differ from (b) above?

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Definitions:

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