(Table: Firms A and B X) Two firms have formed an agreement to restrict output. Firm B Restrict Output Expand Output 100, 100 60,130 Firm A Restrict Output Expand Output 130,60 75,75 They are playing an infinitely repeated game in which output decisions must be made every period. Both firms are using grim trigger strategies. If d (discount rate) = 0.80, Firm B's expected payoff from cheating on the agreement is
(Table: Firms A and B X) Two firms have formed an agreement to restrict output. Firm B Restrict Output Expand Output 100, 100 60,130 Firm A Restrict Output Expand Output 130,60 75,75 They are playing an infinitely repeated game in which output decisions must be made every period. Both firms are using grim trigger strategies. If d (discount rate) = 0.80, Firm B's expected payoff from cheating on the agreement is
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:(Table: Firms A and B X) Two firms have formed an agreement to restrict output.
Firm B
Restrict Output Expand Output
100, 100
60,130
Firm A
O 505
500
They are playing an infinitely repeated game in which output decisions must be made every
period. Both firms are using grim trigger strategies.
O 470
Restrict Output
Expand Output
430
130, 60
75.75
If d (discount rate) = 0.80, Firm B's expected payoff from cheating on the agreement is
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