20.8 Suppose the demand for steel bars in Example 20.1 fluctuates with the business cycle. During expansions demand is Q= 7,000- 100P,

Assume also that expansions and recessions are equally likely and that firms know what the economic conditions are before setting their price.

a. What is the lowest value of S that will sustain a trigger price strategy that maintains the appropriate monopoly price during both recessions and expansions?

b. If 8 falls slightly below the value calculated in part (a), how should the trigger price strategies be adjusted to retain profitable tacit collusion?