Explain what the discount factor is and the factors which determine the size of the discount factor (). Explain why collusion is sustainable if the discount factor is sufficiently high or markets are sufficiently concentrated. Use the Asymmetric Bertrand Grim model done in class to illustrate your answer by using the parameter values indicated below the diagram to solve for the minimum market share needed to sustain collusion for each firm. Determine whether collusion is sustainable in this market. Asymmetric Bertrand Grim Parameter values: PC = 70, QC = 60, cH = 20, QN = 110, cL = 10,  = .2 P PC A B C D E QC QN cH cL Demand Q 

(10 marks). Suppose there are two markets: A and B. Firm 1 and Firm 2 operate in both Market A and Market B and play a Multi-market Bertrand-Grim Strategy. Firm 3 and Firm 4 operate in Market B only and play a single-market Bertrand-Grim Strategy. Inverted demand is given by P = 60 - Q in each market. Marginal cost for each firm is constant and equal to MC = 20. The discount factor is = 0.7. i. Determine if collusion at the monopoly price in both markets is sustainable. If so then indicate the sustainable range of market shares for firm 1 and firm 2 in Market A (1 , 2 ) and for firm 1, firm 2, firm 3 and firm 4 in Market B (1 , 2 , 3 , 4 ). ii. Now suppose there are no multi-market firms. Determine if collusion at the monopoly price in both markets is sustainable. If so then indicate the sustainable range of market shares for firm 1 and firm 2 in Market A (1 , 2 ) and for firm 3, firm 4, firm 5 and firm 6 in Market B (3 , 4 , 5 , 6 )