JUUSI Lumelion Status QUESTION 6 Two firms are engaged in a joint venture. Each year, they decide whether to invest effort in the joint venture (which is costly), or simply free-ride on the effort of the other firm The game is represented below. Firm 2 Effort No Effort Firm 1 Effort 25, 23 0,50 No Effort 50,0 10.10 a) Is this game a prisoners' dilemma? Explain Suppose that past actions are common knowledge and the game is expected to be played each year and forever. Each firm's profit is the present value of the stream of ingle- penod profits, where the discount factor is it for firm b) Define a grim-trigger strategy profile -) Detive conditions whereby the strategy profile in (b) is an SPNE JUUSI Lumelion Status QUESTION 6 Two firms are engaged in a joint venture. Each year, they decide whether to invest effort in the joint venture (which is costly), or simply free-ride on the effort of the other firm The game is represented below. Firm 2 Effort No Effort Firm 1 Effort 25, 23 0,50 No Effort 50,0 10.10 a) Is this game a prisoners' dilemma? Explain Suppose that past actions are common knowledge and the game is expected to be played each year and forever. Each firm's profit is the present value of the stream of ingle- penod profits, where the discount factor is it for firm b) Define a grim-trigger strategy profile -) Detive conditions whereby the strategy profile in (b) is an SPNE