Question for Competitive Analysis:

Question. Collusion with temporary price wars. Consider the repeated interaction Bertrand model presented in class with 2 firms. Explain why a collusive agreement is not stable if firms only commit to punish a deviating firm for one period (i.e. after a deviation, both firms revert to the one-period Nash equilibrium for one period, but then the following period return to the collusive price). How would your answer change if there were 3 firms