90.2K

Verified Solution

Link Copied!

Consider a situation where two identical firms are simultaneously deciding whether to price high or price low. If both firms price high, they both receive half of the market's profits, 2. If one firm prices high, while the other firm prices low, the low pricing firm receives all of the market's profits, , while the high pricing firm receives 0 profits. If both firms price low, they both receive 0 profits. (a) Depict the formal form representation of this simultaneous move game. Find all psNE. (b) Suppose now that the firms decided to collude to charge a high price. For what minimal discount factor do the firms cooperate by charging a high price? Consider a situation where two identical firms are simultaneously deciding whether to price high or price low. If both firms price high, they both receive half of the market's profits, 2. If one firm prices high, while the other firm prices low, the low pricing firm receives all of the market's profits, , while the high pricing firm receives 0 profits. If both firms price low, they both receive 0 profits. (a) Depict the formal form representation of this simultaneous move game. Find all psNE. (b) Suppose now that the firms decided to collude to charge a high price. For what minimal discount factor do the firms cooperate by charging a high price

Answer & Explanation Solved by verified expert

See Answer