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Two firms exist in a market with demand curve P=200-1.25Q and identical costs with MC=AC=25. Consider the game matrix of their payoffs when cooperating as
Two firms exist in a market with demand curve P=200-1.25Q and identical costs with MC=AC=25. Consider the game matrix of their payoffs when cooperating as a cartel (where firms split equally monopoly production) and cheating on that cartel (where firms act as Cournot competitors). If the game is played an infinite number of times, what interest rate would leave the firms indifferent to cooperation and defection? Answer in decimal form (e.g., .1, not 10%).
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