Question

1) Which of the following was NOT discussed as an extension to the basic Hotelling models of spatial differentiation?

	A.	Circular market
	B.	Linear market with quadratic transportation costs
	C.	Triangular market with log-linear transportation costs
	D.	Linear market with more competitors

2)

TRUE or FALSE: Tacit collusion can be an equilibrium outcome of the standard, static (i.e. one-period) Cournot model.

		TRUE
		FALSE

3)

The Herfindahl Hirschman Index is based on what model of oligopoly?

	A.	Hotelling
	B.	Differentiation
	C.	Bertrand
	D.	Cournot

4) I

n which of the following cases would you expect collusion (tacit or otherwise) to be most likely?

	A.	alpha=0.95
	B.	alpha=0.05
	C.	alpha=0.50
	D.	alpha=0.25

5)In which of the following cases would you expect collusion (tacit or otherwise) to be most likely?

	A.	n=2 firms
	B.	n=3 firms
	C.	n=4 firms
	D.	n=5 firms

Answer 1

Q1) option C)

Salop circular model,

Linear model with large number of firms

& Model with quadratic costs are extension of hotelling model

Q2) option b)

False

Tacit collusion is a repeated game phenomenon, where the repeated Interaction between firms lead to understanding between firms to maintain the collusion

Q3) option D)

Hhi is based on cournot game

Q4) option c)

Alpha is probability of low demand ,

Q5) option A)

Less number of firms, more easily collusion can be sustained.