A certain rural village has numerous small farms which raise livestock. There are two large and equally sized landowners, Jimmy and Bob, which produce hay for the farmers’ animals. Below is the daily village demand for hay Suppose, for simplicity, that Jimmy and Bob have the same constant cost structure, so maximizing total revenue maximizes profit. If Jimmy and Bob initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium?     Jimmy and Bob will each earn a daily profit of $625.     Jimmy will earn a daily profit of $700 and Bob will earn a daily profit of $500.     Bob will earn a daily profit of $700 and Jimmy will earn a daily profit of $500.     Jimmy and Bob will each earn a daily profit of $525.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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A certain rural village has numerous small farms which raise livestock. There are two large and equally sized landowners, Jimmy and Bob, which produce hay for the farmers’ animals. Below is the daily village demand for hay

Suppose, for simplicity, that Jimmy and Bob have the same constant cost structure, so maximizing total revenue maximizes profit. If Jimmy and Bob initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium?

   

Jimmy and Bob will each earn a daily profit of $625.

   

Jimmy will earn a daily profit of $700 and Bob will earn a daily profit of $500.

   

Bob will earn a daily profit of $700 and Jimmy will earn a daily profit of $500.

   

Jimmy and Bob will each earn a daily profit of $525. 

 

Quantity
(in bales)
0
50
100
150
200
250
300
350
400
450
500
Price
$10
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
Total
Revenue
$0
$450
$800
$1,050
$1,200
$1,250
$1,200
$1,050
$800
$450
$0
Transcribed Image Text:Quantity (in bales) 0 50 100 150 200 250 300 350 400 450 500 Price $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 Total Revenue $0 $450 $800 $1,050 $1,200 $1,250 $1,200 $1,050 $800 $450 $0
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