Strategy to be a sub game-perfect nash equilibrium

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Suppose an industry consists of 2 firms that compete by choosing quantities simultaneously in each period t = 1, 2, 3,...... (in other words, the two firms play infinitely repeated Cournot game). Inverse demand in the industry is given by the linear equation P = 50 - Q. Marginal cost is equal to zero.

Question: Suppose now that consumers purchase only in odd period (t = 1, 3, 5,......). Thus, firms only interact odd periods. Assume that the demand in every two period is 50 - P. Also, suppose all firms discount future profit using the per-period discount factor \delta. How large must \delta be for this strategy to be a Sub game-Perfect Nash Equilibrium?

Reference no: EM13853594

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