Q = qKorea + qJapan + qChina.
Assume that all three countries have a per-ship cost of $30 million:
cKorea = cJapan = cChina
(a) Write the profit functions for each of the three
countries in terms of
qKorea, qJapan, and qChina,
and cKorea, cJapan, or cChina. Find each
country’s best-response rule.
(b) Using your answer to part (a), find the quantity
produced, the market share captured [see Exercise S8, part (c)], and the
profits earned by each country. This will require the solution of three
equations in three unknowns.
(c) What happens to the price of a VLCC in the new
triopoly relative to the duopoly situation in Exercise S8, part (b)? Why?