-Refer to the payoff matrix above. If Best Lights and Bright Lights both know that the above game will be played exactly four times, which of the following will be the outcome of the game in each of the four periods?
A)Set High Price/Set High Price
B)Set Low Price/Set Low Price
C)Set High Price/Set Low Price
D)Set Low Price/Set High Price

Question

-Refer to the payoff matrix above. If Best Lights and Bright Lights both know that the above game will be played exactly four times, which of the following will be the outcome of the game in each of the four periods?
A)Set High Price/Set High Price 
B)Set Low Price/Set Low Price 
C)Set High Price/Set Low Price 
D)Set Low Price/Set High Price

Quizplus · Accepted Answer

In a finitely repeated game with a known end, players tend to choose the Nash equilibrium strategy in each period. If setting low prices is the dominant strategy for both players in a single-period game, they will likely choose to set low prices in each period of the repeated game.

-Refer to the Payoff Matrix Above