Questions in image attached.

2. Strategic Competition Over Time Two companies compete in the following strategic interaction in which they can choose one out of two possible prices that we call low and high. The payoff matrix stating payoffs for any possible prices chosen by the two companies is given below. In each cell, the number on the left indicates the payoff to company B, and the number on the right indicates the payoff to company A. Firm A Low High Firm B Low (200,200) (400, 180) High (180,400) (320,320) Suppose that the firms compete with one another for a substantial and indefinite period of time. Both firms discount future payoffs with an interest rate equal to 100%. Hence the net present value of the payoffs from the interaction is as follows: Pit - P 2 + P3 + Pat .. . (1) where Pt is the payoff in period t. (a) (4 points) A Trigger Strategy is one in which a firm prices high in the first period, continues to price high as long as their competitor has always priced high, and drops to a low price and remains at a low price forever if their competitor ever sets a low price. Is a Trigger Strategy a Nash equilibrium strategy yielding cooperation, that is, making both firms price high forever? Be sure to explain your answer. (b) (4 points) A Tit-for-Tat strategy is one in which a firm prices high in period 1, and then, in any future period t, chooses a price equal to whatever price was chosen by the competitor in the previous period t - 1. Is a Tit-for-Tat strategy a Nash equilibrium strategy yielding cooperation, that is, making both firms price high forever? Be sure to explain your answer. Hint: To keep things simple, please assume that the deviation considered is the following: Deviate from cooperation in the first period, and restore cooperation in the second period