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
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Chapter1: Making Economics Decisions
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1. Two firms produce identical products at zero cost, and they compete by setting prices. If each firm charges
a low price, the both firms earn profits of zero. If each firm charges a high price, then each firm earns
profits of $30. if one firm charges a high price and the other firm charges a low price, the firm that charges
the 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 Nash
equilibrium if the interest rate if 50 percent?
Transcribed Image Text:1. Two firms produce identical products at zero cost, and they compete by setting prices. If each firm charges a low price, the both firms earn profits of zero. If each firm charges a high price, then each firm earns profits of $30. if one firm charges a high price and the other firm charges a low price, the firm that charges the 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 Nash equilibrium if the interest rate if 50 percent?
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