Bombardier and Embraer have a duopoly in the production of commercial aircraft used as regional jets that seat 40-100 passengers. Suppose the marginal cost of producing each plane is $10M, there are no fixed costs, and the global demand for regional jets is given by the table below:
Price
Qty demanded
50M
50 planes
45M
100 planes
40M
150 planes
35M
200 planes
30M
250 planes
25M
300 planes
20M
350 planes
15M
400 planes
10M
450 planes
5M
500 planes
What is the socially efficient quantity of planes?
If, instead, Bombardier and Embraer form a cartel and sustain full cooperation (price like a monopolist), at what price and quantity would they sell them? Assuming they evenly split the production, how much profit would they each make?
