Author Question: Relative to the case in which two identical firms choose quantities simultaneously in a Cournot ... (Read 29 times)

Wadzanai · **on:** Jul 1, 2018

Relative to the case in which two identical firms choose quantities simultaneously in a Cournot model, if one of the two moves first and is observed by the other, how would this affect its output?
a. it would increase its output, more so if it could deter the other from entering the market at all.
b. it would increase its output, but would moderate this increase if it were concerned about entry deterrence.
c. it would decrease its output if it couldn't deter entry and increase it otherwise.
d. it would decrease its output whether or not it wanted to deter entry.

Question 2

Which factor would facilitate tacit collusion among firms in a market?
a. an increase in the number of firms.
b. a decrease in the probability the market will continue into future periods.
c. a decrease in the interest rate.
d. none of these.