Return to the VLCC triopoly game of Exercise S9. In reality, the three countries do not have identical production costs. China has been gradually entering the VLCC construction market for several...

Return to the VLCC triopoly game of Exercise S9. In reality, the three countries do not have identical production costs. China has been gradually entering the VLCC construction market for several years, and its production costs started out rather high due to lack of experience.

(a) Solve for the triopoly quantities, market shares, price, and profits for the case where the per-ship costs are $20 million for Korea, $40 million for Japan, and $60 million for China

After it gains experience and adds production capacity, China’s per-ship cost will decrease dramatically. Because labor is even cheaper in China than in Korea, eventually the per-ship cost will be even lower in China than it is in Korea.

(b) Repeat part (a) with the adjustment that China’s per-ship cost is $16 million