Consider a market with two firms (firms 1 and 2). The (inverse) demand curve is: p = 120 - q where q= q1 + q2 where q1 and q2 are the quantities produced by firms 1 and 2 respectively.

Firms have zero fixed costs and the marginal costs of production are MC1 = MC2= 20

Assume that the two firms collude (i.e. cooperate). What quantities will each produce? Justify.

Suppose firms choose quantities sequentially: Firm 1 chooses q1 and after that decision is known Firm 2 chooses q2. Find the Subgame Perfect Nash Equilibrium (SPNE).