Y5

2. Suppose two firms exist as Cournot competitors in a market with demand curve P = 400 - 3Q and face identical costs with MC = AC = 40. a) Draw the 2 x 2 game matrix of their payoffs when cooperating as a cartel and cheating on that cartel. b) Suppose the above game is played 11 times. How much profit will each firm make? c) Suppose the above game is played an infinite number of times. What interest rate would leave the firms indifferent to cooperation and defection