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Question 10 Consider a situation where two firms, 1 and 2, compete by choosing prices simultaneously. They can either compete {charge a low price} or
Question 10 Consider a situation where two firms, 1 and 2, compete by choosing prices simultaneously. They can either compete {charge a low price} or cooperate [collude, charging a high price}. The firms play this competition game repeatedly and indefinitely. using a grim trigger strategy to incentiyize cooperation. They use the same interest rate, :3, to discount future payoffs. Payoffs are $4,050 when both firms cooperate and $3,600 when they compete. If one rm charge a low price while the other charges a high price, the firm charging the low price gets 5?,200, and the other gets zero. Which of the following statements is correct? {a}: For anyi cc 1/? the firms will cooperate {b} For anyi 2: 1,!8 the firms will cooperate {c} Fori = 1f9 the firms will be indifferent between cooperating or competing {d} There is no way to sustain cooperation in this scenario
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