Use the following case from question
Two ice cream trucks A&B are playing a simultaneous pricing game.If one of them prices low,he gets all the customers,a payoff of 12,while other gets zero.If both price high they each get a payoff of 6 and if both price low,they get a payoff of 5.
-If the game is repeated indefinitely,and the vendors adopt a trigger strategy such that they would start charging the low price only if the other vendor charged a low price last time,what would be the Nash equilibrium?
A)Both the vendors price high
B)Both the vendors price low
C)Vendor A prices high,vendor B prices low
D)Vendor B prices high,vendor A prices low

Question

​Use the following case from question
Two ice cream trucks A&B are playing a simultaneous pricing game.If one of them prices low,he gets all the customers,a payoff of 12,while other gets zero.If both price high they each get a payoff of 6 and if both price low,they get a payoff of 5.
-​If the game is repeated indefinitely,and the vendors adopt a trigger strategy such that they would start charging the low price only if the other vendor charged a low price last time,what would be the Nash equilibrium?
A)​Both the vendors price high
B)Both the vendors price low
C)Vendor A prices high,vendor B prices low
D)​Vendor B prices high,vendor A prices low

Quizplus · Accepted Answer

In a repeated game with a trigger strategy, both vendors have an incentive to maintain a high price to avoid triggering the low price response from the other vendor. Pricing high ensures a stable payoff of 6 for each, which is preferable to the lower payoff of 5 if both price low continuously after a deviation. This mutual high pricing strategy is sustainable and constitutes a Nash equilibrium, as neither vendor has an incentive to deviate unilaterally.

​Use the Following Case from Question

Use the Following Case from Question