-Consider the infinitely-repeated pricing game depicted in Figure 4.4. If the players agree to cooperate, the most likely strategy profile is:
A) {Low, Low}.
B) {High, High}.
C) {Moderate, Moderate}.
D) {Low, High}.
E) {High, Moderate}

Question

-Consider the infinitely-repeated pricing game depicted in Figure 4.4. If the players agree to cooperate, the most likely strategy profile is:
A) {Low, Low}. 
B) {High, High}. 
C) {Moderate, Moderate}. 
D) {Low, High}. 
E) {High, Moderate}

Quizplus · Accepted Answer

In an infinitely-repeated pricing game where players agree to cooperate, the most likely strategy profile is {High, High}. This is because by setting high prices, both firms can maximize their profits over time, avoiding a price war that would lead to lower profits for both.

-Consider the Infinitely-Repeated Pricing Game Depicted in Figure 4