(Table: Firms A and B I) The payoffs represent profits in thousands of dollars. Suppose that two firms are playing an infinitely repeated game. In period 6, Firm B decides it will no longer cooperate with Firm A. If Firm A is using a grim trigger strategy, Firm A will choose:
A) a low price in period seven and all future periods.
B) a low price in period seven and a high price in all future periods.
C) to set price below marginal cost and drive Firm B out of the market.
D) to maintain a high price in all future periods.

Question

(Table: Firms A and B I) The payoffs represent profits in thousands of dollars.  Suppose that two firms are playing an infinitely repeated game. In period 6, Firm B decides it will no longer cooperate with Firm A. If Firm A is using a grim trigger strategy, Firm A will choose:
A) a low price in period seven and all future periods. 
B) a low price in period seven and a high price in all future periods. 
C) to set price below marginal cost and drive Firm B out of the market. 
D) to maintain a high price in all future periods.

Quizplus · Accepted Answer

The Answer of (Table: Firms A and B I) The payoffs represent profits in thousands of dollars.  Suppose that two firms are playing an infinitely repeated game. In period 6, Firm B decides it will no longer cooperate with Firm A. If Firm A is using a grim trigger strategy, Firm A will choose:
A) a low price in period seven and all future periods. 
B) a low price in period seven and a high price in all future periods. 
C) to set price below marginal cost and drive Firm B out of the market. 
D) to maintain a high price in all future periods.

(Table: Firms a and B I) the Payoffs Represent Profits