Why do firms practice price discrimination?
6. Carson Bell and Renee Dohr own the only two firms in the United States that sell a unique herbal vitamin
supplement that has no close substitutes. They plan a secret meeting at the National Zoo in Washington,
DC, to form a cartel in order to increase their profit.
a.How do they determine the price of their good?
b.Do Carson and Renee have an incentive to cheat on their agreement with each other? Explain.
c.How could Carson or Renee cheat?
7. Which would concern you most, a 5 percent increase in concentration in a market where the four-firm
concentration ratio is 3 percent, 42 percent or 85 percent? Explain your reasoning.
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