Mario's Pizza and Bella's Pizza are in tacit collusion to cooperate and each charge a high price for their pizzas. If Mario's Pizza initially cooperates with Bella's Pizza, but then switches and charges a low price and Bella's Pizza responds by forever charging a low price, this is an example of ________.

Question

Quizplus · Accepted Answer

This is an example of a trigger strategy, where one player deviates from the initially cooperative agreement and triggers a long-term change in the behavior of both players. The trigger in this case is Mario's Pizza charging a low price.

Mario's Pizza and Bella's Pizza Are in Tacit Collusion to Cooperate