Collusion in Infinitely Repeated Bertrand Models (Example)

An example showing the conditions required for the grim trigger strategy to sustain collusion in the Bertrand model of oligopoly.

[@DiggybackGaming]

Very good explanation of the subject matter, thanks.

[@realsimon1598]

Perfect Video from start to finish, thanks a lot, that saved me a lot of time and pain :)

[@lukasbaumgart2914]

I LOVE YOU FOR THIS EXCELLENT EXPLANATION DUDE!!!!

[@CulinaryPhilip]

Amazing Video!

[@michelecasieri6623]

Hi mate, I want to ask you some suggestions, because I have this exercise in which we have two firms that set the same price but with different share demand, so different weight, how I can develop this kind of problem, thanks for the helping!

[@harshitagoyal7134]

is there any specific reason why you took the inverse demand function before solving for monopoly quantity? I solved directly for the monopoly price and got 35 as well

[@sebastianwaiecon]

By convention, I always solve the monopoly profit maximization problem as a quantity-setting problem, so that is the first step. You can certainly do it as a price-setting problem and get the same answer as it is mathematically identical. The reason I do this is to maintain consistency with how we solve perfect competition and the Cournot model - unrelated to this video in particular but useful in the broad sweep of industrial organization.

[@cbd8692]

Thanks for the video! Btw, what happens if it is Simultaneous indefinitely repeated competition (repeated quantity competition)?

[@sebastianwaiecon]

Repeated Cournot is fairly well-documented. I should have a video out on that in a few weeks.

[@cbd8692]

@@sebastianwaiecon how is it exactly different from the repeated bertrand model ?

[@jeppescheer3017]

In a game where the monopoly profit is 32, where there exist two firms and with an interest rate of 0,5 the net present value of colluding is 48. However, if one firm cheats on the agreement they go back to producing at a profit giving level (since products are differentiated) this will yield a profit of 12 for each firm forever, where the firm that cheated on the agreement yields 32 in monopoly profit for one period. How would you isolate r in a case like this, where there are continuous profits after the agreement has been cheated upon? I ask since my intuition tells me that the profit of 12 earned afterwards also has to be discounted

[@Skey1337]

Do you have one for Cournot?

[@sebastianwaiecon]

I have a video on one-shot Cournot, but not infinitely repeated.

[@griffenwolfe6710]

Wouldn't the collude quantity in the one shot scenario be 35/6? Why is it 5?

[@sebastianwaiecon]

They are evenly splitting the quantity (30) into 6 parts, so 30/6 = 5. 35 is the price.

[@92JinKazama]

These results would not hold if the costs for these firms were different, correct? There is no reason to collude in this case, if one firm can just underprice the others by a marginal amount?

[@sebastianwaiecon]

That is correct.

[@marwawasit8953]

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