Table 14-2

Table 14-2 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 14-2.Suppose pricing PlayStations is a repeated game in which Walmart and Target 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 14-2
  
Table 14-2 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 14-2.Suppose pricing PlayStations is a repeated game in which Walmart and Target 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 rounds.

Table 14-2 Table 14-2 Shows the Payoff Matrix for Walmart and Target