Two duopolists are sharing a market in which they are contemplating whether to compete or to cooperate. If they cooperate and behave like a monopolist they will share the monopolist profit of $1800. If they compete each will get a profit of $800 but if one them cooperates while the other chooses to compete the one who cooperates gets $700 while the one who competes will end up with $1000. Set-up the game, explain the process and show the Nash-equilibrium reached when the game is played.
Two duopolists are sharing a market in which they are contemplating whether to compete or to cooperate. If they cooperate and behave like a monopolist they will share the monopolist profit of $1800. If they compete each will get a profit of $800 but if one them cooperates while the other chooses to compete the one who cooperates gets $700 while the one who competes will end up with $1000. Set-up the game, explain the process and show the Nash-equilibrium reached when the game is played.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 13PAE
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Two duopolists are sharing a market in which they are contemplating whether to compete or to cooperate. If they cooperate and behave like a monopolist they will share the monopolist profit of $1800. If they compete each will get a profit of $800 but if one them cooperates while the other chooses to compete the one who cooperates gets $700 while the one who competes will end up with $1000. Set-up the game, explain the process and show the Nash-equilibrium reached when the game is played.
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