Sarah's Soothing Nappies, Inc. and Orville's Odourless Nappies, Inc. are duopolists who have agreed to collude. Orville has decided that he will comply with the collusive agreement as long as Sarah cooperated in the previous period. But if Sarah cheated in the previous period, Orville will punish Sarah by cheating in the current period. Orville's strategy is referred to as a

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Orville's strategy is a tit-for-tat strategy because he reciprocates Sarah's actions from the previous period, cooperating if she cooperated and cheating if she cheated. This approach is based on reciprocity and is a common strategy in repeated games to sustain cooperation.