Table 16-8
The demand for a product that is produced at zero marginal cost is reflected in the table.

(a) What is the profit-maximising level of production for a group of oligopolistic firms that operate as a cartel?
(b) Assume that this market is characterised by a duopoly in which collusive agreements are illegal. What market price and quantity will be associated with a profit-maximising Nash equilibrium?
(c) Assume that this market is served by three identical firms that operate as independent oligopolists (no collusive agreements). Without calculating the profit-maximising equilibrium, do you think the quantity produced will be higher, lower, or equal to your answer in part b?

Question

Table 16-8
The demand for a product that is produced at zero marginal cost is reflected in the table.

(a) What is the profit-maximising level of production for a group of oligopolistic firms that operate as a cartel?
(b) Assume that this market is characterised by a duopoly in which collusive agreements are illegal. What market price and quantity will be associated with a profit-maximising Nash equilibrium?
(c) Assume that this market is served by three identical firms that operate as independent oligopolists (no collusive agreements). Without calculating the profit-maximising equilibrium, do you think the quantity produced will be higher, lower, or equal to your answer in part b?

Quizplus · Accepted Answer

The Answer of Table 16-8
The demand for a product that is produced at zero marginal cost is reflected in the table.

(a) What is the profit-maximising level of production for a group of oligopolistic firms that operate as a cartel?
(b) Assume that this market is characterised by a duopoly in which collusive agreements are illegal. What market price and quantity will be associated with a profit-maximising Nash equilibrium?
(c) Assume that this market is served by three identical firms that operate as independent oligopolists (no collusive agreements). Without calculating the profit-maximising equilibrium, do you think the quantity produced will be higher, lower, or equal to your answer in part b?

Table 16-8 The Demand for a Product That Is Produced at Zero