[Collusion] (6 points each, total 18 points)

Two gas stations, A-Ok Oil and X-on Service Station, compete to sell gas in a very small town.Every day, they choose whether to charge $3.00 or $2 for a gallon of gas. If they both choose the same price they split the market and each sells 500 gallons.If they choose different prices, the station with a lower price sells 800 gallons, while the station with a higher price sells only 200 gallons. The marginal cost of gasoline is $1 per gallon. The firms discount future profits by a factor of .9 per day.