Price wars can be the result of
A) a cooperative equilibrium.
B) a firm playing a tit-for-tat strategy in which last period the competitors complied with a collusive agreement.
C) new firms entering the industry and immediately agreeing to abide by a collusive agreement.
D) new firms entering an industry and all firms then finding themselves in a prisoners' dilemma.

Question

Quizplus · Accepted Answer

Price wars can occur when new firms enter an industry, leading to increased competition and a prisoners' dilemma situation where firms are incentivized to undercut each other's prices to gain market share.

Price Wars Can Be the Result of