Two firms, Firm 1 and Firm 2, produce backpacks and the total demand for backpacks in the market is estimated to be P = 300 - Q where Q = Q1 + Q2. The two firms produce an identical product and face the same production costs given by TCi = 75 + 100Qi where marginal cost is MCi = 100.

a. The two firms try to coordinate their actions (i.e. collude) and set quantity and price like a single monopolist. What is the quantity produced by each firm, price charged, and profit earned by each firm if they adhere to the plan?

b. What will be the equilibrium quantity, price and profits of each firm if they compete in a Cournot setting?

c. Draw a payoff table containing the profits of each firm where the strategies are: Choose the competitive Cournot quantity versus choose the collusive quantity. Identify the one-shot Nash equilibrium.