In a repeated prisoners’ dilemma decision, both managers can make credible threa

ID: 1206833 • Letter: I

Question

In a repeated prisoners’ dilemma decision, both managers can make credible threats to punish cheating because

a. if either manager cheats, the other manager can increase its profit by also cheating.

b. both of the cheating cells in the payoff table are strategically stable cells.

c. when both firms cheat, they both avoid the Nash equilibrium cell.

d. both a and c.

33 Price matching is a strategic move that

seeks to make cheating unprofitable.

must generally be announced publicly in order to have the desired effect.

has no usefulness to managers if a simultaneous pricing decision is going to be made only one time.

both a and b

all of the above

34 Price matching

is a strategic commitment.

is a flexible pledge to match any lower prices offered by rivals.

must be irreversible in order to have the desired effect.

both a and c.

both b and c

Answer 1:

Option d. If one cheats, the other will also cheat to increase its profits.

When both cheat, they avoid Nash equilibrium cell.

Answer 33:

All of the above are correct in this case.

Answer 34:

It is a strategic commitment and must be irreversible to have the desired effect. ( Option c)

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