You are the manager of Taurus Technologies (Firm 1), and your sole competitor is Spyder Technologies (Firm 2). The two firms’ products are viewed as identical by most consumers. The relevant cost functions are C(Q1) = 120 + 8Q1 and C(Q2) = 120 + 12Q2, and the market demand curve for this unique product is given by P = 160 – 2.5Q. The manager of Spyder approached you to set an agreement on quantities. You are tempted to inmediately reject the offer, but instead, let her know that you will think about it. In your office, you complete the following calculations, assuming pre-agreement market shares:
1. if you supply Q-competition, and Spyder supplies Q-collusion, the market price would be, P = ___. if you would supply Q-collusion, and Spyder supplies Q-competition, the market price would be $___. if you supply Q-competition, and Spyder supplies Q-collusion, Spyder profits would be $___.
2. Firm 2's profits would be $____. Spyder's profits would be (firm 2) = ___.
3. Firms decide to collude using average costs for their collusion calculations. Given this infirmation, the profits for firm one would increase by extra $__.
4. Q1 = __. Q2=__
5. Firms decide to collude using average costs for their collusion calculations. Given this infirmation, the profits for firm two if Firm 1 supplies Q-collusion, and Firm 2 supplies Q-BRF would be: $__.
6. Q1-agreement = ___. Q2-agreement = ___.
7. Price = ___.
8. market Price, P = __.
7. if you supply Q-collusion, and Spyder supplies Q-competition, Spyder profits would be $___.
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