Question

Problem 4. (True/False). For each statement, assert whether it is true of false and explain your answer. 1. In a finitely repeated Pure (Homogeneous Goods) Betrand game there can be more than one Subgame perfect Nash equilibrium (SPNE). 2. It not possible to support a collusive outcome in a finitely repeated Pure Betrand game. 3. In a sequential Bertrand game, the follower firm has a second mover advantage because prices are strategic complements. 4. With three identical firms, total industry profits are lower in a Stackelberg setting than in a Cournot setting.

Answer 1

1) False: In this particular case one has to see the definition of Betrand Game: It says games in which firms use only price strategies and play simultaneously are Bertrand games. Hence the Nash Equilibrium is just met through one subgame.

2) False, well you can suport a collusive outcome if in the repeated pure betrand game, in a market the prices are deliberately put prices under your control with help of the collusion.

3) True, it is because the follower is mere player supporting a particular strategy. They are the one who recieves the advantages of when and how the prices are kept in favor of the firm.

4) False, the first mover earns more in a Stackelberg than it does in Cournot. They choose higher quantity in Stackelberg than in Cournot. This follows from the fact that firm 1 earns higher profits in Stackelberg than in Cournot.