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Suppose there are n firms in an oligopoly, the inverse demand is given by P(Q) =...

Suppose there are n firms in an oligopoly, the inverse demand is given by P(Q) = a - Q, where Q = q1+q2+...+qn. Consider the infinitely repeated game based on this stage game.

a) What is the lowest value of δ such that the firms can use trigger strategies to sustain the monopoly output level in a SPNE?

b) How does the answer vary with n and why?

c) If δ is too small for the firms to use trigger strategies, what is the most profitable symmetric SPNE that can be sustained?

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