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1. Two firms sell a similar, but differentiated, product. Each firm can choose either to cooperate with its competitor by charging a relatively high price
1. Two firms sell a similar, but differentiated, product. Each firm can choose either to cooperate with its competitor by charging a relatively high price $6 or to not cooperate by charging a relatively low price $4. The payoff matrix is given by: (a) What is the equilibrium if firms set prices for their products simultaneously? (b) Now consider a repeated game and each firm plays the tit-for-tat strategy. What is the equilibrium if it is an infinitely repeated game? What is the equilibrium if it is a finite repeated game
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