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. Consider a “punishment” variation of the two-firm oligopoly situation shown in Figure 13

. Consider a “punishment” variation of the two-firm oligopoly situation shown in Figure 13

. Consider a “punishment” variation of the two-firm oligopoly situation shown in Figure 13.3 in the chapter. Suppose that if one firm sets a low price while the other sets a high price, then the firm setting the high price can fine the firm setting the low price. Suppose that whenever a fine is imposed, X dollars is taken from the low-price firm and given to the high-price firm. What is the smallest amount that the fine can be such that both firms will want to always set the high price?

Abhinav 05-Dec-2019

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