Table 12.2

Table 12.2 shows the payoff matrix for London Drugs and FutureShop from every combination of pricing strategies for the popular PlayStation 3. At the start of the game, each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 12.2.Suppose pricing PlayStations is a repeated game in which London Drugs and FutureShop will be selling the game system in competition over a long period of time.In this case, what is the most likely outcome?

Question

Table 12.2
  
Table 12.2 shows the payoff matrix for London Drugs and FutureShop from every combination of pricing strategies for the popular PlayStation 3. At the start of the game, each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 12.2.Suppose pricing PlayStations is a repeated game in which London Drugs and FutureShop will be selling the game system in competition over a long period of time.In this case, what is the most likely outcome?

Quizplus · Accepted Answer

In a repeated game, firms are more likely to reach a cooperative equilibrium where they charge the high price to maximize long-term profits, as they can punish deviations in future periods.

Table 12.2 Table 12.2 Shows the Payoff Matrix for London Drugs and Matrix