The market demand curve for canned tuna is estimated to be Q = 10,000,000 - 2,000,000 * P. There are three firms in the canned tuna industry, each facing a marginal cost of $0.20.

a. What model would best characterize the canned tuna industry, Cournot or Bertrand? Why?

b. What is the equilibrium price, quantity and profits for each firm

c. What price would the firms set if they were operating as a monopoly? If all three firms set the monopoly price and split the profits, what would their profits be?

d. Assume the three firms face this pricing decision on a weekly basis for one year. Is there an equilibrium where all of the firms would set the monopoly price in the first week? Why or why not?

e. Assume the three firms face this pricing decision each week for the foreseeable future. What is the minimum discount factor that would allow the firms to set the monopoly price and split the profits equally each week using a grim strategy?