General Equilibrium Model Setting Consider the following setting in a market: I. Consumers There are m = 200 identical consumers. Each consumer utility function is given by U = (q +1)y Each consumer has an income equal to 4. There are two markets in this economy: the market for good q and the market for good y. The equilibrium prices in both markets are p for good q (to be calculated) and py = 1. II. Producers Assume that two firms play an infinitely repeated Cournot game, and they seek to coordinate their production decisions of good q according to the following rules (identical to the ones provided in class): 1. In the first period (t=1), every firm starts cooperating. 2. In all subsequent periods (t> 1): (a) Each firm continuous cooperating, as long as all firms cooperated in period t=1. (b) If, instead, a firm observes some past cheating (deviation from the cooperative outcome), then produces the Cournot output thereafter. Each firm faces a marginal cost (equal to the average total cost) equal to 1. Question Find the condition (inequality) of the discount factor & such that cooperation can be sustained