1. Two firms produce identical products at zero cost, and they compete by setting prices. If each firm chargesa low price, the both firms earn profits of zero. If each firm charges a high price, then each firm earnsprofits of $30. if one firm charges a high price and the other firm charges a low price, the firm that chargesthe lowest price earns profits of $50 and the firm charging the highest price earns profits of zero.a. Write this game in normal form.b. Suppose the game is infinitely repeated. Can the players sustain the "collusive outcome" as a Nashequilibrium if the interest rate if 50 percent?

In a Nash equilibrium, each player is assumed to know the equilibrium strategies of the other…

Answered: a. Write this game in normal form. b.…

a. Write this game in normal form. b. Suppose the game is infinitely repeated. Can the players sustain the "collusive outcome" as a Nash equilibrium if the interest rate if 50 percent?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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