Consider a "Prisoners' Dilemma" Game Consisting of Two Firms in Collusion

question 94

Multiple Choice

Consider a "prisoners' dilemma" game consisting of two firms in collusion to maximize profit.The game is repeated indefinitely and each player employs a tit-for-tat strategy.The equilibrium when the two firms share the monopoly profit is called a

• A)credible strategy equilibrium.
• B)dominant player equilibrium.
• C)duopoly equilibrium.
• D)trigger strategy equilibrium.
• E)cooperative equilibrium.

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Definitions:

Compensating Balance

A minimum bank balance that a borrower must maintain as a condition for obtaining a loan, often used to compensate banks for the loan services.

Effective Interest Rate

The real interest rate on a loan or financial product, accounting for the effect of compounding over a given period.

Minimum

The lowest possible amount, quantity, or degree achievable or permissible.

Gross Working Capital

The total of all current assets in a company, which includes items such as cash, inventory, and accounts receivable.