Use the Following to Answer Questions

question 128

Multiple Choice

Use the following to answer questions:
Figure: Payoff Matrix II for Blue Spring and Purple Rain
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and Purple Rain describes two producers of bottled water. Suppose Blue Spring charges a high price and Purple Rain does the same. In the next period, Blue Spring charges a low price and Purple Rain incurs a loss. If Purple Rain responds with a tit-for-tat strategy, it will:

• A) always charge a low price-the same as its dominant strategy.
• B) make random changes in its price so that Blue Spring is left with no systematic strategy.
• C) charge a low price in the next period and thereafter charge the same price that Blue Spring charged in the previous period.
• D) always charge a high price.

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