Consider an oligopoly with 2 firms, each with constant marginal cost and no fixed costs. Firm 1 has marginal cost 1, while firm 2 has marginal cost 2. The market demand is P= 6 0.1Q. The firms compete by picking quantities, and this game is repeated indefinitely. Both firms have discount factor 8. a) Find each firm's profit from the one-period Cournot outcome (q,q). b) Suppose that the firms are not allowed to share profits. Is there an SPE where the one- period maximum joint profit is realized in each period? Explain. c) Consider the following strategy profile: In period 1, firm 1 plays q* and firm 2 plays q2*. Thereafter, if (qi*, 92*) has been played in every previous period, then it is played again. Otherwise, (q,q?) is played. Write down the conditions on q* and q2* so that this strategy profile is a SPE. The only variables in your answer should be q*, q2* and S. 2 Consider an oligopoly with 2 firms, each with constant marginal cost and no fixed costs. Firm 1 has marginal cost 1, while firm 2 has marginal cost 2. The market demand is P= 6 0.1Q. The firms compete by picking quantities, and this game is repeated indefinitely. Both firms have discount factor 8. a) Find each firm's profit from the one-period Cournot outcome (q,q). b) Suppose that the firms are not allowed to share profits. Is there an SPE where the one- period maximum joint profit is realized in each period? Explain. c) Consider the following strategy profile: In period 1, firm 1 plays q* and firm 2 plays q2*. Thereafter, if (qi*, 92*) has been played in every previous period, then it is played again. Otherwise, (q,q?) is played. Write down the conditions on q* and q2* so that this strategy profile is a SPE. The only variables in your answer should be q*, q2* and S. 2