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Exercise n. 5 Suppose that two firms compete in quantity (Cournot) in a market where the demand for the good they produce is given by P(Q) = 260-20. The cost function for each firm is given by C,(q,) = 20q, (i =1,2) a) What is the discount factor that can sustain a collusive outcome in an infinitely repeated game? Suppose now that four firms compete in the market. Each firm has no fixed costs and a marginal cost MC = 20. b) If the market game is repeated indefinitely, What is the discount factor that can sustain a collusive outcome? What is the effect of the number of firms on the likelihood of tacit collusion? c) How would your answer to (b) change if the firms did not compete in quantities but in prices (Bertrand)? Under which form of competition do you think it is easier to sustain collusion? Why? d) How would your answer to (b)change if defection were detected after & periods