When There's Uncertainty as to the Length of a Game

question 44

Multiple Choice

When there's uncertainty as to the length of a game,

• A)cooperation still does not occur, because cooperation unravels at the beginning of the game.
• B)cooperation can potentially occur if trigger strategies are adopted.
• C)firms will cooperate because they treat the game as one that is infinitely repeated.
• D)firms will randomly pick among the Nash equilibria.

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Definitions:

Retention Rate

A metric indicating the percentage of earnings not paid out as dividends but retained by the company for reinvestment.

Plowback Ratio

The proportion of the firm’s earnings reinvested in the business (and therefore not paid out as dividends). The plowback ratio equals 1 minus the dividend payout ratio.

Expected Growth Rate

The anticipated rate at which an investment, economy, or other financial entity will grow over a certain period.

Rate of Return

The outcome in terms of profit or loss on an investment over a designated period, presented as a percentage of the investment’s first cost.