If Firm A and Firm B are playing a finitely repeated game in which they both believe there is a 90 percent chance that the game will continue each period, all of the following are true except which one?
A)Both managers will worry about punishment from cheating.
B)Tacit collusion is not possible.
C)Both firms can earn higher profit by cooperating.
D)There is not an end- game problem.

Question

Quizplus · Accepted Answer

Tacit collusion is indeed possible in finitely repeated games, especially when the end is not clearly defined or when the probability of continuation is high, as it allows firms to implicitly coordinate their strategies to sustain higher profits over time. The other options (A, C, D) are consistent with the dynamics of repeated games where the threat of punishment for cheating, the potential for higher profits through cooperation, and the presence of an end-game problem are typical considerations.

If Firm a and Firm B Are Playing a Finitely