In 2014, the Bridgestone tire corporation admitted guilt in a justice department pricefixing case that involved 26 suppliers of auto parts including Toyo Tires. Bridgestone, Toyo Tires, and other auto parts suppliers colluded in order to charge higher prices, and thus earn higher profits. Bridgestone alone was fined $425 million for their part in the price-fixing conspiracy. Consider the following payoff table: 

a. If Bridgestone and Toyo are setting prices for one period only, what will the Nash equilibrium be? Briefly explain your reasoning. 

b. If, instead, Bridgestone and Toyo play this game over and over, how could they find a way to cooperate with each other? Use a payoff table to help illustrate your answer

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Toyo charges high prices (conspire) Toyo charges low prices (defect) Bridgestone charges high prices (conspire) Toyo receives $15 billion profit Bridgestone Stevenson/Wolfers, Publishers receives $15 billion profit Toyo receives $18 billion profit Bridgestone charges low prices (defect) Toyo receives $10 billion profit Bridgestone receives $18 billion profit Toyo receives $12 billion profit Bridgestone receives $10 billion profit Principles of Economics, 1e, © 2020 Worth Bridgestone receives $12 billion profit