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QUESTION 11 Consider a market for a homogenous product with four active companies. Firms have a constant marginal cost of production of $10. The market demand is given by D(p) = 90 - P. Firms set prices in a repeated game with infinite horizon and a discount factor S E [0, 1]. (a) [12 marks] Construct a subgame perfect equilibrium with trigger strategies in which firms collude on the industry-profit maximising prices and punish deviation by reverting forever to the static Nash equilibrium. Under which condition does this equilibrium hold? (b) [12 marks] Suppose the market demand only arises every second period. In other periods, demand is equal to zero. Construct a subgame perfect equilibrium with trigger strategies in which firms collude on the industry-profit maximising prices and punish deviation by reverting forever to the static Nash equilibrium. Under which condition does this equilibrium hold?QUESTION 11 Consider a market for a homogenous product with four active companies. Firms have a constant marginal cost of production of $10. The market demand is given by D(p) = 90 - P. Firms set prices in a repeated game with infinite horizon and a discount factor S E [0, 1]. (a) [12 marks] Construct a subgame perfect equilibrium with trigger strategies in which firms collude on the industry-profit maximising prices and punish deviation by reverting forever to the static Nash equilibrium. Under which condition does this equilibrium hold? (b) [12 marks] Suppose the market demand only arises every second period. In other periods, demand is equal to zero. Construct a subgame perfect equilibrium with trigger strategies in which firms collude on the industry-profit maximising prices and punish deviation by reverting forever to the static Nash equilibrium. Under which condition does this equilibrium hold