Consider the following repeated version of the Bertrand duopoly games. Two firms names prices simultaneously- p1 and p2. Demand for firms i's product is a-pi if pipi; and it is (a-pi)/2 if pi=pi. Marginal cost of production for both firms is c where c
The game is repeated infinitely many times.
Show that the firms can use trigger strategies (that switch forever to the static game Nash equilibrium after any deviation) to sustain the monopoly price level in a subgame perfect equilibrium if and only if &1/2. [if it helps simplify you can first argue for a=10 and c=4 and show the result for a general a and c).