Consider two maple syrup producers that engage in Cournot competition.Inverse demand for maple syrup is given by P(Q) = 16 Q and the marginal cost of…

Consider two maple syrup producers that engage in Cournot competition.Inverse demand for maple syrup is given by P(Q) = 16 − Q and the marginal cost of eachproducer is 4. The two producers compete with each other each period by choosing an amount ofmaple syrup to produce, q1 and q2, respectively.

(a) [10 points] If the producers do not collude, what is the Cournot equilibrium amount of syrup produced by each firm every period and what are the lifetime profits of each producer?

(b) [10 points] If the discount factor of each producer is δ = 0.2, will the firms be able to sustain collusion using the grim punishment strategy?

(c) [10 points] How much would the producers together be willing to pay to lobby the government to implement a maple syrup quota system that limits each producer to producing 3 units of maple syrup a month?

(d) [10 points] Do you expect jam producers to support, be indifferent to, or be against the maple syrup cartel? Explain your answer.

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