15.6 Recall Example 15.6, which covers tacit collusion. Suppose (as in the example) that a medical device is produced at constant average and marginal cost of $10 and that the demand for the device is given by Q=5,000 - 100P. The market meets each period for an infinite number of periods. The discount factor is 8. 15.7

a. Suppose that n firms engage in Bertrand competition each period. Suppose it takes two periods to discover a deviation because it takes two periods to observe rivals' prices. Compute the discount factor needed to sustain collusion in a subgame-perfect equilibrium using grim strategies.

b. Now restore the assumption that, as in Example