Re: isi 2009

Posted by deepak on Apr 26, 2012; 10:16pm
URL: http://discussion-forum.276.s1.nabble.com/isi-2009-tp7474636p7504482.html

For Q 6)
When the firms stay separate, Profit in each case = 900
When firms 2 and 3 merge, profit(1) = 1600 and profit of the merged firm = 1600 < 2*900(when they stayed separate). Hence firm 1 is better off when the other 2 merge. Firms 2 and 3 are worse off than earlier.
When the firms behave as a cartel, collective profit is 3600. Since they are symmetric, each firm has a profit of 1200. Hence all of them are better off when compared with when they existed as individual entities.

For Q 7)
y* = s/2del
c* = (1-s)y = (1-s)*s/2del
c* is max at s = 0.5 so yes. That's what i get too.