A Finitely Repeated Game Differs from an Infinitely Repeated Game

question 34

Multiple Choice

A finitely repeated game differs from an infinitely repeated game in that:

• A) The former needs a lower interest rate to support collusion than the latter needs.
• B) There is an end-of-period problem for the former.
• C) A collusive outcome can usually be sustained in the former but not the latter.
• D) All of the statements associated with this question are correct.

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Definitions:

Sharpe Measure

An indicator of the performance of an investment compared to a risk-free asset, adjusted for its risk, calculated as the difference in returns divided by the standard deviation of the investment.

Reward

Typically refers to the potential gains or returns derived from an investment or action, balanced against the risk involved.

Volatility

The degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns.

Portfolio Excess Return

The return on an investment portfolio that exceeds the return of a benchmark or risk-free asset.