Use the table below to answer the following question.
Table 15.3.1

-Consider the game shown in Table 15.3.1 based on potential gas prices between two competitors. The game is played repeatedly and the result is a cooperative equilibrium. The payoffs in the table show the economic profit of the firms. The most likely outcome is
A)a cycle of first $0.95/litre, then $1.15/litre, etc.
B)Hare sets her prices at $1.15/litre, and Turtle sets his at $0.95/litre.
C)Hare sets her prices at $0.95/litre, and Turtle sets his at $1.15/litre.
D)both set their prices at $1.15/litre.
E)both set their prices at $0.95/litre.

Question

Use the table below to answer the following question.
Table 15.3.1
 
-Consider the game shown in Table 15.3.1 based on potential gas prices between two competitors. The game is played repeatedly and the result is a cooperative equilibrium. The payoffs in the table show the economic profit of the firms. The most likely outcome is
A)a cycle of first $0.95/litre, then $1.15/litre, etc. 
B)Hare sets her prices at $1.15/litre, and Turtle sets his at $0.95/litre. 
C)Hare sets her prices at $0.95/litre, and Turtle sets his at $1.15/litre. 
D)both set their prices at $1.15/litre. 
E)both set their prices at $0.95/litre.

Quizplus · Accepted Answer

In a cooperative equilibrium, both firms would likely set their prices at $1.15/litre to maximize their joint profits, avoiding the lower profits associated with price competition.

Use the Table Below to Answer the Following Question