Question

Exercise 5 Let us consider a market where 4 firms compete 'a la Bertrand. The demand function is given by q(p) = 250 - 7p. The cost function is the same for both firms and it is C(qi) = 10qi for all i E {1,2,3,4}. • Write explicitly the demand and profit functions of 1, 2, 3, and 4. • Derive best reply functions and the Nash equilibrium of the game. • If firm 1 find develop a new technology and produce at a new cost C1(91) = 571, what would happen in the market? • Find the discount factor that can sustain a collusive agreement where firms equally share the market if firm interact for 10 period. • What if they interact an infinite number of periods? Activate Windows

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Answer 1

Whereas, qq q 125- te while q, 125-35 if c for firm 2,3,4 is greater than 5 then output produced by them is lower than of firm 1 if c for fern 2, 3, 4 is less than 5 then output produced by them is greater than of firm 1. The dis vint factors of profits is for 10 period * ( 1484524....+59) Threshold & is 1-2 1-22

& for infinite number of period no I am + I samt u