There are two firms producing a homogeneous product in a market. Both firms have the same marginal cost of 0.5 and the market demand is Q = XXXXXXXXXX3P . Suppose each firm can either collude, which...

There are two firms producing a homogeneous product in a market. Both firms have the same marginal cost of 0.5 and the market demand isQ = 10 3- 2 3P . Suppose each firm can either collude, which is each to produce at half of the monopoly output level or the Cournot competition output level. Fill in the payoffs (profits) associated with each player in the following table:

Use the normal form table that you just created for the 2 firms to answer the following questions:

a) Does either firm have a dominant strategy?

b) What is the Nash Equilibrium in this game?

c) Is this a prisoner dilemma game? Explain.

d) If it is a prisoner dilemma game, propose at least one solution to get out of this trap.