Assume That Two Firms Are Engaged in a Pricing Rivalry

question 13

Multiple Choice

Assume that two firms are engaged in a pricing rivalry and attempt collusion.If each firm knows that the pricing game will last for a finite number of periods,and the collusion contract is not enforceable,then they will have an incentive to:

• A)cheat in every period.
• B)cheat in alternate periods.
• C)cheat in every period but the first.
• D)cheat in every period but the last.

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Definitions:

Marginal Decision Making

The process of evaluating the benefits and costs of small (or marginal) adjustments to an existing course of action.

Economic Concept

A theoretical construct that represents ideas or theories within economics to explain various aspects of the economy, such as supply and demand, inflation, or growth.

Marginal Analysis

A method used in economics and decision-making that examines the costs and benefits of making small (marginal) adjustments to the quantity of a good or service.

Economic Terms

Vocabulary and phrases specific to the study and practice of economics, encompassing theories, models, and real-world financial practices.