2. Fill in the blanks. Consider the following simultaneously-played game to answer the next question. Firm 2 Cooperate (cartel) Cheat Cooperate 6,6 -2,10 Firm 1 Cheat 10,-2 2,2 Suppose the game is repeated. Each firm adopts the following retaliation strategy: "If the other firm cheats in period one, then I wl retaliate by playing "cheat" in all ensuing periods." If the above game is repeated for a finite number of periods with an unknown end date, and with the interest rate equal to 20% and if the probability the game will end after a given play is .20, then expected present value of cheating on the cartel agreement would be whereas the expected present value of cooperating would be probability that the game will end after a given below would tend to favor the outcome (CIRCLE ONE: cheating, cooperating) because Other things constant, an increase in the (provide a BRIEF written explanation of the intuition of your conclusion). (10 pts.) 3. Return to the numbers in given in the table from question (2). If this game was played for an infinite number of rounds, a firm would be indifferent between cheating and cooperating if the interest rate was approximately: (note: 100% in decimal terms is simply 1.0) a. 2090 b. 33.3% c. 50% d. 100%. e. 66.7%. f. 150%. g. 200% h. none of the above. 2. Fill in the blanks. Consider the following simultaneously-played game to answer the next question. Firm 2 Cooperate (cartel) Cheat Cooperate 6,6 -2,10 Firm 1 Cheat 10,-2 2,2 Suppose the game is repeated. Each firm adopts the following retaliation strategy: "If the other firm cheats in period one, then I wl retaliate by playing "cheat" in all ensuing periods." If the above game is repeated for a finite number of periods with an unknown end date, and with the interest rate equal to 20% and if the probability the game will end after a given play is .20, then expected present value of cheating on the cartel agreement would be whereas the expected present value of cooperating would be probability that the game will end after a given below would tend to favor the outcome (CIRCLE ONE: cheating, cooperating) because Other things constant, an increase in the (provide a BRIEF written explanation of the intuition of your conclusion). (10 pts.) 3. Return to the numbers in given in the table from question (2). If this game was played for an infinite number of rounds, a firm would be indifferent between cheating and cooperating if the interest rate was approximately: (note: 100% in decimal terms is simply 1.0) a. 2090 b. 33.3% c. 50% d. 100%. e. 66.7%. f. 150%. g. 200% h. none of the above