6 Firm 1lowhighlowinhigh5 2000 20 10 10The firms simultaneously set prices at regular intervals. In the equilibrium of this game (if played only once), each firm selects the low price.However, the firms are playing this game repeatedly, for an infinite period of time. The firms utilize trigger strategies in order to maintain thecollusive outcome.Suppose that both firms adopt the grim trigger strategy. They continue charging the high price unless one of them cheats. Upon one of themcharging the low price, they play the equilibrium, low-price strategy for the rest of the game. What has to be true about the interest rate (r) forcooperation to be sustainable?Or<25%Or> 25%Or< 50%Or> 50%

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Suppose that both firms adopt the grim trigger strategy. They continue charging the high price unless one of them cheats. Upon one of them charging the low price, they play the equilibrium, low-price strategy for the rest of the game. What has to be true about the interest rate (r) for cooperation to be sustainable? Or<25% Or> 25% Or<50% Or > 50%

Suppose that both firms adopt the grim trigger strategy. They continue charging the high price unless one of them cheats. Upon one of them charging the low price, they play the equilibrium, low-price strategy for the rest of the game. What has to be true about the interest rate (r) for cooperation to be sustainable? Or<25% Or> 25% Or<50% Or > 50%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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