Question

Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs a tit-for-tat strategy. The equilibrium is A. Gear cheats and Trick complies with the agreement. B. Trick cheats and Gear complies with the agreement. O c. both firms comply with the agreement OD. both firms cheat on the agreement. O E. one of the firms exits the market.

Answer 1

Answer 1 :- Option 'c' is the correct Answer

(both firm comply with the agreement)

A tit-for-tat strategy can be used in a repeated game but not a single-play game.

Answer 2 :- Option 'e' is the correct Answer

In an oligopoly market, the Herfindahl - Hirschman Index is usually above 2,500

Herfindahl-Hirschman Index (HHI) is the sum of the squares of the market shares of each firm in the industry.

in an oligopoly, there are only a few firms, each with a relatively large market share, so the HHI tends to be very high for an oligopolistic industry.

Answer 3 :- Option 'a' is the correct Answer

This game is described as prisoners dilemma.

Unless you count on corporation of other player or players, the incentive is to throw the game, to throw the other person under the bus. This lays at the genesis of the game. The only winning strategy is to cooperate every time.