Figure: Payoff Matrix II for Blue Spring and Purple Rain (Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and
Purple Rain refers to two producers of bottled water.Suppose Blue Spring charges a high price and Purple Rain does the same.In the next period, Blue Spring charges a low price and Purple Rain earns a loss.Purple Rain's tit-for-tat strategy would be to:

Question

Figure: Payoff Matrix II for Blue Spring and Purple Rain   (Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and
Purple Rain refers to two producers of bottled water.Suppose Blue Spring charges a high price and Purple Rain does the same.In the next period, Blue Spring charges a low price and Purple Rain earns a loss.Purple Rain's tit-for-tat strategy would be to:

Quizplus · Accepted Answer

Tit-for-tat strategy means copying the opponent's previous move. So, Purple Rain should charge a low price in the next period and then charge the same price that Blue Spring charged in the previous period. This strategy ensures that both companies are alternating between high and low prices, and neither has a significant advantage. Additionally, charging a high price would allow Blue Spring to earn higher profits and dominate the market. Therefore, the best strategy for Purple Rain would be to stick to the tit-for-tat strategy and charge a low price initially.