Two firms are producing diamond, and the normal form payoff matrix is expressed as follows:

Q3 (6 marks). Two firms are producing diamond, and the normal form payoff matrix is expressed as follows: Firm 2 Low output High output Firm 1 Low output 500, 500 200, 700 High output 700, 200 400, 400 a (2 mark). What is the pure strategy Nash equilibrium of this game? Is there a dominant strategy in this game? If both firms successfully collude, what would be the equilibrium? b (4 marks). Suppose the above game is repeated infinitely, and the discount rate in each period is 8. Each firm uses a trigger strategy in which a firm cooperates ("low output") as long as the other firm cooperates. But, should the other firm cheats ("high output"), the firm responds by cheating forever. Under what condition of 8 can both firms cooperate