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A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals]. A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pЄ [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul- taneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1/2. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals].

A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals]. A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pЄ [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul- taneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1/2. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals].

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 3E
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A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals]. A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pЄ [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul- taneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1/2. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals].
Transcribed Image Text:A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F>0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pin [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simultaneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals]. A competition authority introduces the following leniency program. The first firm to come forward to reveal a cartel receives a fine reduction of 60% off the full fine F > 0. All other convicted cartel members pay the full fine of F. Now consider an industry in which two firms have formed a cartel. The cartel has stopped its activities. However, there is still a probability pЄ [0, 1] that, in the absence of any leniency application, the competition authority discovers the cartel and imposes the fine F on both firms. Suppose firms simul- taneously choose whether to report or not. If both firms apply at the same time, each is getting the fine reduction with probability 1/2. Give the highest value of p for which an equilibrium exists in which both firms do not self-report [maximum two decimals].
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