QUESTION 14Consider the following simultaneous move game between two firms. Each firm can charge either a low or a high price. The numbers represent the profit of each firm at each period.Firm 1High PriceLow Pricer≥ 40%r≥ 20%Firm 2High Price Low Price30,30 0,55r≥ 50%full cooperation cannot be achieved in this game.Or≤ 20%55,0This game is repeated infinity times, and at each period both players must choose their actions simultaneously.In this case, cooperation at the high price will be possible if the interest rate, r, isr≤ 50%r≤ 40%The players are deciding whether or not to cooperate - specifically, whether or not to follow this cooperation strategy:"Each player will play 'high price' as long as no one has played 'low price' before. If someone has played 'low price' before, then each player will play 'low price' forever."25, 25

Above game consists of two players : Firm 1 & 2 Strategy Set of firm 1 = Strategy Set of firm…

Consider the following simultaneous move game between two firms. Each firm can charge either a low or a high price. The numbers represent the profit of each firm at each period. Firm 1 High Price Low Price Firm 2 High Price Low Price 0 0,55 25,25 30,30 55,0

Consider the following simultaneous move game between two firms. Each firm can charge either a low or a high price. The numbers represent the profit of each firm at each period. Firm 1 High Price Low Price Firm 2 High Price Low Price 0 0,55 25,25 30,30 55,0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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