Assume That in a Price-Fixing Game, If Player a Breaks

question 4

Multiple Choice

Assume that in a price-fixing game, if Player A breaks the agreement in the first year, she earns $11 while Player B earns $5.However, if Player A breaks the agreement once, Player B decides to break the agreement for eternity, leaving each to receive $8 per year for the rest of their lives.If they both keep the agreement each receives $9 per year for the rest of their life.If the discount rate is 120 percent per period:

• A)Player A will prefer to break the agreement in the first year.
• B)Player A will prefer to break the agreement in the second year.
• C)Player A will prefer to keep the agreement throughout her life.
• D)Player A will prefer to keep the agreement only for the first five years.