Consider the following simultaneous move game between two firms. The game is repeated and in each period the firms can choose to charge either a high price or a low price. The numbers represent the profit of each firm in each period based on their choices. The players must decide whether or not to adopt the following 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. Use this information to answer questions #10 and #11. Firm 2 10. If this game is repeated infinity, cooperation will be possible if High Price Low a. r< 100% b. r<75% c. r< 50% d. r< 25% e. full cooperation cannot be achieved in this game Price Low 15 , 15 50 ,0 Price High 0,50 30 , 30 Price If this game is repeated 1,000 times, cooperation will be possible if r< 100% b. r<75% c. r<50% d. r<25% full cooperation cannot be achieved in this а. е. game Firm 1

Consider the following simultaneous move game between two firms. The game is repeated and in each period the firms can choose to charge either a high price or a low price. The numbers represent the profit of each firm in each period based on their choices. The players must decide whether or not to adopt the following 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. Use this information to answer questions #10 and #11. Firm 2 10. If this game is repeated infinity, cooperation will be possible if High Price Low a. r< 100% b. r<75% c. r< 50% d. r< 25% e. full cooperation cannot be achieved in this game Price Low 15 , 15 50 ,0 Price High 0,50 30 , 30 Price If this game is repeated 1,000 times, cooperation will be possible if r< 100% b. r<75% c. r<50% d. r<25% full cooperation cannot be achieved in this а. е. game Firm 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Q11

Consider the following simultaneous move game between two firms. The game is repeated and in each period
the firms can choose to charge either a high price or a low price. The numbers represent the profit of each firm
in each period based on their choices. The players must decide whether or not to adopt the following
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. Use this information to
answer questions #10 and #11.
Firm 2
10. If this game is repeated infinity, cooperation will be possible if
High
Price
Low
a. r< 100%
b. r<75%
c. r< 50%
d. r< 25%
e. full cooperation cannot be achieved in this game
Price
Low
15, 15
50 , 0
Price
High
0,50
30 , 30
Price
If this game is repeated 1,000 times, cooperation will be possible if
r< 100%
b. r<75%
c. r< 50%
d. r< 25%
full cooperation cannot be achieved in this game
а.
е.
Firm 1

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