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2. Consider the following Cournot game: There are two identical firms with zero fixed cost and zero constant marginal cost. The industry demand is given by $P = 1 - Q$. Define $q^c = \frac{1}{3}$ and $q^a = \frac{1}{4}$. Note that, if both firms chooses $q^c$, their joint profit is equal to the monopoly profit. Now suppose that the Cournot game is repeated infinitely, at time $t = 0, 1, 2, \dots$. Assume that the two firms share the same discount factor $\delta$ ($0 < \delta < 1$). Consider the following strategies: Each firm chooses $q^c$ at time $t = 0$. It furthermore chooses $q^c$ at $t$ if in every time preceding $t$ both firms have chosen $q^c$; otherwise it chooses $q^a$ at $t$ and forever after. Question: Find the minimum value of the discount factor under which the strategies mentioned above can sustain the collusion between the two firms

          2. Consider the following Cournot game: There are two identical firms with zero fixed cost
and zero constant marginal cost. The industry demand is given by $P = 1 - Q$. Define
$q^c = \frac{1}{3}$ and $q^a = \frac{1}{4}$. Note that, if both firms chooses $q^c$, their joint profit is equal to the
monopoly profit.
Now suppose that the Cournot game is repeated infinitely, at time $t = 0, 1, 2, \dots$. Assume
that the two firms share the same discount factor $\delta$ ($0 < \delta < 1$). Consider the following
strategies: Each firm chooses $q^c$ at time $t = 0$. It furthermore chooses $q^c$ at $t$ if in every
time preceding $t$ both firms have chosen $q^c$; otherwise it chooses $q^a$ at $t$ and forever after.
Question: Find the minimum value of the discount factor under which the strategies
mentioned above can sustain the collusion between the two firms

2. Consider the following Cournot game: There are two identical firms with zero fixed cost
and zero constant marginal cost. The industry demand is given by P = 1 - Q. Define
q^c = (1)/(3) and q^a = (1)/(4). Note that, if both firms chooses q^c, their joint profit is equal to the
monopoly profit.
Now suppose that the Cournot game is repeated infinitely, at time t = 0, 1, 2, …. Assume
that the two firms share the same discount factor δ (0 < δ < 1). Consider the following
strategies: Each firm chooses q^c at time t = 0. It furthermore chooses q^c at t if in every
time preceding t both firms have chosen q^c; otherwise it chooses q^a at t and forever after.
Question: Find the minimum value of the discount factor under which the strategies
mentioned above can sustain the collusion between the two firms

Added by Elizabeth B.

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