A new minor league baseball stadium is opening soon and the owneris only allowing local, family-owned restaurants to sell within the park. Two hotdog vendors are set to sell within the stadium: (i) The HOT Dog and (ii) Ballpark Frankies. The Baseball park necessitates that the vendors set their prices at the beginning of each season and then hold the price constant during the games that occur that season. The fans are not sensitive to the quality of the hotdog, just the price.

The two vendors have every inclination to stay in the ballpark for the life of their firms, so imagine that this will be an infinitely repeated game. Based on relative prices, the potential payoffs for the season are listed below:

Low Price High Price

Low Price $10,000 , $10,000 $90,000 , ($3,000)

High Price ($3,000) , $90,000 $20,000 , $20,000

Given the high current interest rate of 10%, The HOT Dog is considering to post a high price in the inaugural season and hope that Ballpark Frankies follows as well with a high price of their own. Evaluate if this is a risky strategy for The HOT Dog.