Refer to the Normal-Form Game of Price Competition in the Payoff

question 11

Multiple Choice

Refer to the normal-form game of price competition in the payoff matrix below. Suppose that firm A deviates from a trigger strategy to support a high price. What is the present value of A's payoff from cheating?

• A) 70
• B) 50
• C) 30
• D) 20

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Definitions:

RRSP

Registered Retirement Savings Plan, a Canadian account for holding savings and investment assets, with tax benefits.

Canadian Equity

Investments in stocks or shares of Canadian companies, representing ownership and a claim on part of the company's assets and earnings.

Annually Compounded

An interest rate compound method where the calculation of interest is done once per year.

Loan Term

The duration of time over which a loan agreement is in effect, and by the end of which the loan should be repaid.