In a repeated game of Bertrand competition, suppose two firms are playing the grim trigger strategy. They discount future payoffs at B. A firm will play the monopoly price and earn 8 every period, so long as the other firm does the same. However, if a firm deviates from playing the monopoly price, the other firm plays the one-shot Bertrand outcome forever.

Microeconomic Theory
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ISBN:9781337517942
Author:NICHOLSON
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Chapter8: Game Theory
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In a repeated game of Bertrand competition, suppose two firms are playing the grim trigger strategy.
They discount future payoffs at B. A firm will play the monopoly price and earn 8 every period, so
long as the other firm does the same. However, if a firm deviates from playing the monopoly price,
the other firm plays the one-shot Bertrand outcome forever.
Collusion is a Nash equilibrium if B is Select J
[ Select)
Space 1 options: less than or equal to, equal
to, greater than or equal to
Space 2 options: 0, 0.5, 1, 8, 16
Transcribed Image Text:In a repeated game of Bertrand competition, suppose two firms are playing the grim trigger strategy. They discount future payoffs at B. A firm will play the monopoly price and earn 8 every period, so long as the other firm does the same. However, if a firm deviates from playing the monopoly price, the other firm plays the one-shot Bertrand outcome forever. Collusion is a Nash equilibrium if B is Select J [ Select) Space 1 options: less than or equal to, equal to, greater than or equal to Space 2 options: 0, 0.5, 1, 8, 16
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