Economics question

Question 16 Not yet saved Marked out of 6.00 {V Flag question {6 marks) Consider an infinitely repeated game played between two firms with the following payoffs: {250, 290] if both firms deviate {290, 330) if both firms cooperate {230, 370} if only firm 2 deviates {350, 270] if only firm 1 deviates a. What probability-adiusted discount factor would ensure that Firm 1 would cooperate in a Nash equilibrium if Firm 2 applied a trigger strategy in the event that Firm 1 deviated? {2 marks) in. What probability-adjusted discount factor would ensure that Firm 2 would cooperate in a Nash equilibrium if Firm 1 applied a trigger strategy in the event that Firm 2 deviated? {2 marks] c. Suppose now it takes each firm one extra period to realise if the other has deviated. That is, the trigger strategy is applied two periods after deviation by the other rm. Write out the present value of expected profit under both cooperation and deviation for each firm. Using these, calculate the new probability-adjusted discount factors for each firm. {2 marks] I" iii IAVBHIJVVFrVE 093EIO