A ________ is a plan by one firm to price a good at marginal cost forever if the other cheats on an agreement.

Question

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This is known as a grim strategy, where a firm is willing to sustain low profit margins in order to punish a cheating competitor by pricing at marginal cost forever. This strategy is often used in situations of repeated interactions between firms where trust is an important factor. Pure strategy refers to a strategy that does not involve randomization or mixing of actions, price discrimination refers to the practice of charging different customers different prices, and collusion refers to a secret agreement between firms to limit competition.

A ________ Is a Plan by One Firm to Price