BISM 3205 - Assignment Bb 3440 ProQuest + 0 Bb 3440 Bb 34 X Bb Micro https://learn.uq.edu.au/bbcswebd ... UQ Mail 80% QUESTION 3 [35 MARKS] Consider a market for a homogenous product with four active companies i E {1, 2, 3, 4}. Firms have a constant marginal cost of production of $40. The market demand is given by D(P) = 200 - p. Firms set prices in a repeated game with infinite horizon and a discount factor o e [0, 1]. (a) [10 marks Construct a subgame perfect equilibrium with trigger strategies in which firms collude on the industry-profit maximising quantities, and punish deviation by revert- ing forever to the static Nash equilibrium. Under which condition does this equilibrium hold? (b) [10 marks] Suppose the market demand from above only arises every second period. In other periods, demand is equal to zero. Construct a subgame perfect equilibrium with trig- ger strategies in which firms collude on the industry-profit maximising profits, and punish deviation by reverting forever to the static Nash equilibrium. Under which condition does this equilibrium hold? (c) [15 marks] Suppose the four firms are all active in two markets. Market A is described by the set-up in subquestion (a), that is, demand arises in every period. In the second market, market B, demand only occurs every second period as assumed in subquestion (b). Construct a subgame perfect equilibrium with trigger strategies in which firms collude on the industry-profit maximising profits, and punish deviations by reverting forever to the static Nash equilibrium in both markets. Under which condition does this equilibrium hold? Explain the difference in cartel sustainability between (a), (b) and (c)