The Following Depicts a Normal-Form Game of Price Competition Suppose the Game Is Infinitely Repeated,and the Interest Rate Is

question 125

Multiple Choice

The following depicts a normal-form game of price competition. $\begin{array}{l}\quad\quad\quad\quad\quad\quad\text { Firm B}\\\text { Firm A}\begin{array}{|l|l|l|} \hline &\text { Low Price } & \text { High Price }\\\hline & & \\\text { Low Price } & 0,0 & 25,-5 \\\hline & & \\\text { High Price } & -5,25 & 10,10 \\\hline\end{array}\end{array}$ Suppose the game is infinitely repeated,and the interest rate is 5 percent.Both firms agree to charge a high price,provided no player has charged a low price in the past.If both firms stick to this agreement,then the present value of firm B's payoffs are:

• A) 105.
• B) 190.
• C) 210.
• D) 525.