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ConsiderFirm1andFirm2,whoproduceidenticalproductsandcompeteinamarketwith theinversedemandcurvep(y)=20y.Theircompetitiongoesonforinfinitelymanyperiods. Ineachperiodtheysimultaneouslychoosetheirquantities,andproduceatzerocost. They discountfutureprofitsusingadiscountfactor

ConsiderFirm1andFirm2,whoproduceidenticalproductsandcompeteinamarketwith theinversedemandcurvep(y)=20y.Theircompetitiongoesonforinfinitelymanyperiods. Ineachperiodtheysimultaneouslychoosetheirquantities,andproduceatzerocost. They discountfutureprofitsusingadiscountfactor<1. Thefirmswouldliketocolludesoeachcanobtainhalfof themonopolyprofits. Forwhat discount factors, cantheyplayaSubgamePerfectNashEquilibriuminwhichtheyobtain thisdesiredoutcomeineveryperiod?Beclearaboutwhatstrategyprofileyoupropose,and showthatifthediscountfactorishighenough,thenthereisnoprofitabledeviationforeither firmatanypossiblesubgame

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