Suppose market demand is P = 150 - Q, cost of production of each firm is C(qi) = 30qi . Assume there are two firms,1 and 2, engaging in a Cournot competition. Consider a price-fixing (or collusion) agreement between them to achieve monopoly price (hence the price-fixing).
1. Draw the normal form of the game where either firm can choose to Cooperate or Defect.
2. Is collusion an equilibrium?
3. What is the equilibrium?