If a firm uses a grim trigger retaliation strategy,all firms could end up with zero economic profit.

Question

Quizplus · Accepted Answer

A grim trigger retaliation strategy involves punishing a competitor who cheats in the market by also reducing prices, and continuing to do so even after the cheating stops. This can lead to a price war and ultimately result in all firms, including the retaliator, experiencing a reduction in their economic profit, possibly to the point of zero. Therefore, the statement is true.

If a Firm Uses a Grim Trigger Retaliation Strategy,all Firms