Asked by Princess Mandy on Sep 24, 2024
Verified
If the game continues for infinity,then the new Nash Equilibrium is
A) for one firm to charge a HP forever.
B) for your firm charge a LP when the other firm does.
C) for each firm to charge HP so long as the rival does,otherwise charge a LP.
D) for each firm to charge LP until the rival does,and then to charge a HP forever.
Simultaneous Move Game
A type of game theory scenario where all participants choose their actions without knowledge of the others' decisions at the same time.
Nash Equilibrium
A concept in game theory where no player can benefit by changing their strategy while the other players keep theirs unchanged.
High Price
A cost that is considered to be at the upper end of the price range for a product or service.
- Identify and analyze Nash equilibria in various strategic situations.
- Inspect the approaches to strategy within contexts of gaming that require both repeated and immediate decision-making actions.
Verified Answer
XC
X-ISABELLA CAPUTI PINTO2 days ago
Final Answer :
C
Explanation :
In an infinitely repeated game, the best strategy is to maintain cooperation (in this case, both firms charging HP) as long as the other player does. If the other player deviates and charges LP, then the best response is to punish by also charging LP. This creates a cycle of cooperation and punishment, which can sustain the HP outcome in the long run. Therefore, in this game, each firm should charge HP so long as the rival does, otherwise charge LP.
Learning Objectives
- Identify and analyze Nash equilibria in various strategic situations.
- Inspect the approaches to strategy within contexts of gaming that require both repeated and immediate decision-making actions.