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3. (30 points) Two firms want to cooperating by using collusive pricing wit payoffs taking the form of a repeated prisoner's dilemma game. When they
3. (30 points) Two firms want to cooperating by using collusive pricing wit payoffs taking the form of a repeated prisoner's dilemma game. When they bot cooperate, both firms get a profit of 20 for the period. If one firm defects an cuts prices, they will get a profit of 50 in the current period and the other play will get 0. If both firms defect and price low, both get 10 for the period. Imagin the firms are using a grim trigger strategy. What is the lowest discount fact where both firms will be able to sustain cooperation
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