2. Consider an infinitely repeated game in which, in each period, two firms with zero costs choose quantities and prices are given by: p1 = 1 - q1 - q2/2, p2 1 - q2 - q1/2. Firms have a common discount factor of 8 = 1/2. %3D a) Explain what a trigger strategy is and determine whether the firms can attain the joint profit maximising outcome in a subgame perfect equilibrium using trigger strategies. b) Explain what a stick and carrot strategy is and discuss whether it is possible to attain the joint-profit maximising outcome in a subgame perfect equilibrium using stick and carrot strategies.

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