Consider the following static game. The numbers in each cell represent the expected profits in thousands of dollars from alternative aggressive and reactive price strategy profiles.

a. What is the Nash equilibrium if this game is played just once?

b. What strategy profile results in the best payoff for both players?

c. Is cooperation a Nash equilibrium if this game is played twice?

d. Suppose this game is infinitely repeated. If the interest rate used to discount future payoffs is 7 percent, what is the present value of the stream of payoffs to both companies by not cooperating?

e. What is the present value of the stream of payoffs from cooperation?

f. What is the present value to either company defection?

g. Based on your answers to the above, is a coalition stable?

h. Suppose the interest rate is 12 percent. Is a coalition stable?

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Blue Aggressive Reactive Aggressive (500, 500) (100, 600) Orange Reactive (600, 100) (150, 150) Payoffs: (Orange, Blue)