If a firm has a reputation for engaging in destructive price wars, then its rivals will be less likely to engage in price competition. The firm's reputation represents a
A) zero-sum game.
B) prisoners' dilemma.
C) credible threat.
D) backward induction.

Question

Quizplus · Accepted Answer

A firm's reputation for engaging in destructive price wars acts as a credible threat to its competitors, deterring them from initiating price competition due to the fear of triggering a price war that could be harmful to all parties involved.

If a Firm Has a Reputation for Engaging in Destructive