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2. Consider a market with two horizontally differentiated firms, X and Y. Each has a constant...

2. Consider a market with two horizontally differentiated firms, X and Y. Each has a constant marginal cost of $10. Demand functions are: Qx = 100 –2Px + Py Qy = 100 –2Py + Px Suppose the two firms are infinitely lived and have a discount factor of δ. Write down a trigger strategy that could make cooperation sustainable on a collusive price of 60 in an infinitely repeated duopoly game in the above model. What is the condition on δ that would make cooperation sustainable?

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