1. Table 1 describes the game that FedEx and UPS play. Each firm can decide whether to collude, or compete with the other. Collusion is cooperation between firms to raise joint profits, for example by price fixing. That is, the firms could collude by agreeing to set prices at a certain level and not undercut each other. If a firm decides to compete, this means that it acts in its own self-interest, i.e., to maximize its own individual profit. UPS Collude Compete FedEx Collude 120, 120 85, 180 Compete 180, 85 100, 100 Table 1: FedEx and UPS (a) Explain why (Collude, Collude) is not a Nash equilibrium. (b) Find all Nash equilibria of this game. (c) Are FedEx and UPS playing a coordination game or a prisoner's dilemma? Briefly explain. (d) Suppose that FedEx and UPS know that they will play this game 20 times, instead of once. Explain why they still would not collude in any period of the game. What will they do in each period? (e) Suppose that FedEx and UPS play this game an infinite number of times. Find the range of interest rate i such that they can collude forever if each plays a trigger strategy of collude until the other competes, and then compete forever