Suppose three identical firms engage in Cournot competition, with identical marginal costs of c. Inverse market demand is given by the function P = a - bQ, where Q=q1 + q2+q3. a) Assume the firms collude to maximize total profit. What quantity does each firm produce and what is their individual profit? (assume firms equally split production and profits from the collusive profit maximization problem) b) One firm considers reneging on the collusion production agreement in part (a). What is the maximum profit achievable with this deviation from the collusive agreement? c) Assuming the oligopoly game is infinitely repeated, what discount factor is necessary to sustain cooperation if a Cournot equilibrium trigger strategy is threatened as punishment? d) Does the discount factor depend on the marginal cost (c) for each firm? Explain why or why not.

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