Oscar

-Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix shows the economic profit that each firm can make. If the game is played repeatedly and Felix and Oscar both use a tit- for- tat strategy, then _______.

Question

Oscar
 
-Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix shows the economic profit that each firm can make. If the game is played repeatedly and Felix and Oscar both use a tit- for- tat strategy, then _______.

Quizplus · Accepted Answer

In a tit-for-tat strategy, each firm starts by cooperating (in this case, sticking to the cartel agreement) and then mimics the other firm's previous action in subsequent rounds. If both firms start by cooperating and continue to do so as long as the other cooperates, they will both maintain the cartel agreement and earn the higher profits associated with cooperation, which is $10 million each in this scenario.

Oscar -Oscar and Felix Are the Only Firms That Clean Offices