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Suppose Firms A and B are engaged in an infinitely repeated game to decide whether to charge a High price or a Low price. Their
Suppose Firms A and B are engaged in an infinitely repeated game to decide whether to charge a High price or a Low price. Their payoff matrix is below: Firm B High price Low price Firm A High price 20,20 10, 30 Low price 30,10 15,15 The firms agree to charge a high price in the first period and both use a grim reaper strategy if their rival decides to cheat on this agreement. At what discount rate would Firm A be indifferent between cheating on the agreement or maintaining the collusive agreement
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