Two firms produce identical products at zero cost, and they compete by setting prices. If each firm charges a low

price, then both firms earn profits of zero. If each firm charges a high price, then each firm earns profits of $30. If

one firm charges a high price and the other firm charges a low price, the firm that charges the lower price earns

profits of $50 and the firm charging the higher price earns profits of zero. Explain and show your work:

a. Which oligopoly model best describes this situation? (2)

b. write this game in normal form. (2)

c. Suppose the game is infinitely repeated. Can the players sustain the "collusive outcome" as a Nash equilibrium

if the interest rate is 50 percent? Explain

Two rms produce identical products at zero cost, and they compete by setting prices. If each rm charges a low price, then both rms earn prots of zero. If each rm charges a high price, then each rm earns prots of $30. If one rm charges a high price and the other rm charges a low price. the firm that charges the lower price earns prots of $50 and the rm charging the higher price earns prots of zero. Explain and show your work: a. Which oligopoly model best describes this situation? (2) b. Write this game in normal form. (2) c. Suppose the game is innitely repeated. Can the players sustain the "collusive outcome" as a Nash equilibrium if the interest rate is 50 percent? Explain. (4)