-Consider the pricing game depicted in Figure 5.5 in which the payoffs are in millions of dollars. If this game is played seven times, the Nash equilibrium strategy profile in the first stage is:
A) {Low price, Low price}.
B) {Low price, High price}.
C) {High price, Low price}.
D) {High price, High price}.

Question

-Consider the pricing game depicted in Figure 5.5 in which the payoffs are in millions of dollars. If this game is played seven times, the Nash equilibrium strategy profile in the first stage is:
A) {Low price, Low price}. 
B) {Low price, High price}. 
C) {High price, Low price}. 
D) {High price, High price}.

Quizplus · Accepted Answer

In a repeated game scenario, players often aim for a cooperative outcome that maximizes their total payoff over time. Choosing {Low price, Low price} initially can be part of a strategy to establish cooperation, as it can lead to higher cumulative payoffs for both players over multiple rounds, assuming they can avoid the temptation to defect for short-term gain. This choice reflects a common strategy in repeated games to start cooperatively in the hope of establishing a pattern of mutual benefit.

-Consider the Pricing Game Depicted in Figure 5