Consider the infinitely repeated game that I discussed in class that relies on the grim trigger strategy. I used the following definitions.
Î coop = payoff for one period to a cooperative firm given that
the other n-1 other firms are also cooperating.
Î ch = payoff for one period to a firm that has cheated given
that the other n-1 firms are playing cooperatively.
Î comp = payoff per period per firm if all n firms are playing
competitively.
Assume (1) that this industry is perfectly competitive in the absence of collusion; and (2) that if any single firm undercuts the collusive price-by even a tiny amount- it gets the entire market and other firms sell nothing; (3) if all n firms are cooperating, each sells the same amount as all the other firms.
Questions:
1. What does Î comp equal numerically?
2. If β equals .9, what is the maximum number of firms there can be in this industry if collusion is to be sustained as a Nash equilibrium?
3. Does your answer to the previous question depend on the size of the collusive payoff?
4. What law did the lysine defendants get charged with?
5. If they had set lower collusive prices, would this fact have affected their guilt or innocence? Explain.
Consider the infinitely repeated game that I discussed in class that relies on the grim trigger strategy. I used the following definitions.
Î coop = payoff for one period to a cooperative firm given that
the other n-1 other firms are also cooperating.
Î ch = payoff for one period to a firm that has cheated given
that the other n-1 firms are playing cooperatively.
Î comp = payoff per period per firm if all n firms are playing
competitively.
Assume (1) that this industry is perfectly competitive in the absence of collusion; and (2) that if any single firm undercuts the collusive price-by even a tiny amount- it gets the entire market and other firms sell nothing; (3) if all n firms are cooperating, each sells the same amount as all the other firms.
Questions:
1. What does Î comp equal numerically?
2. If β equals .9, what is the maximum number of firms there can be in this industry if collusion is to be sustained as a Nash equilibrium?
3. Does your answer to the previous question depend on the size of the collusive payoff?
4. What law did the lysine defendants get charged with?
5. If they had set lower collusive prices, would this fact have affected their guilt or innocence? Explain.
