Suppose there are two suppliers of spring water in New York State labeled firm 1 and firm 2. Spring water is considered to be a homogeneous good. Let p denot the price per cubic feet of water, q1 quantity sold by firm 1, and q2 the quantity sold by firm 2 Both firms bear the same production cost of c1 c2 15 per cubic meters of water. New York inverse demand function for spring water is given by p= 120 where Q qi+ q2 denotes the aggregate industry supply of spring water in New York. Answer the following questions. (a) Compute the Cournot equilibrium (quantities, price, and profits).
(b) Find the Bertrand equilibrium (quantities, price, and profits). Now suppose the same game is repeated indefinitely in each period t 1, 2, 3,. denote the firms' common time discount factor. Let 6 E (0, 1)
(c) Define the Bertrand repeated game and compute its minimum threshold value of 6 that would make collusion sustainable.
(d) Define the Cournot repeated game and compute its minimum threshold value of 6 that would make collusion sustainable.