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(Table: Firms a and B IX) Two Firms Have Formed

Question 71

Multiple Choice

(Table: Firms A and B IX) Two firms have formed an agreement to restrict output. (Table: Firms A and B IX) Two firms have formed an agreement to restrict output. They are playing an infinitely repeated game in which output decisions must be made every period. Both firms are using a grim trigger strategy. The value of d (discount rate) = ____ would make Firm A indifferent between keeping the agreement or cheating on the agreement. A) 0.75 B) 0.675 C) 0.375 D) 0.25 They are playing an infinitely repeated game in which output decisions must be made every period. Both firms are using a grim trigger strategy. The value of d (discount rate) = ____ would make Firm A indifferent between keeping the agreement or cheating on the agreement.


A) 0.75
B) 0.675
C) 0.375
D) 0.25

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