Assume the demand curve facing an industry can be represented P = 100 – Q. Suppose that two firms collude in an infinitely repeated game, where each firm has marginal costs of 20 per unit. If firm 1 deviates on the collusive agreement, how much additional profit do they make in the period of deviation versus the profit they were making under collusion?

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A: TC1 = 60q MC1 = 60 TC2 = 120q MC2 = 120 Q = 1200 - 2P q1 + q2 = 1200 - 2P P = 600 - 0.5q1 - 0.5q2

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A: P = 400 - 5Q MR = 400 - 10Q MC = 100

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