(Table: Firms a and B X) Two Firms Have Formed

question 35

Multiple Choice

(Table: Firms A and B X) Two firms have formed an agreement to restrict output. 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 ____.

• A) 505
• B) 500
• C) 470
• D) 430

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Definitions:

Boeing

A global American corporation engaged in designing, manufacturing, and selling airplanes, rotorcraft, rockets, satellites, missiles, and telecommunications equipment around the world.

Random Walk

A theory suggesting that the price movements of securities are unpredictable and random, making it impossible to consistently predict their future movements based on past trends.

Stock Prices

The current market price at which a share of a company is bought or sold.

Price Changes

Adjustments in the price levels of goods, services, or securities in the market.