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Figure: Payoff Matrix for Jake and Zoe
-(Figure: Payoff Matrix for Jake and Zoe) Look at the figure Payoff Matrix for Jake and Zoe, the only producers of slushies in their tourist town. Every week, each decides whether to price high or price low for the following week. The figure shows the profit per week earned by their two firms. Suppose the firms each decide to price high initially and adopt a tit-for-tat strategy for the following weeks. After a few weeks, Jakes profit would be _____ and Zoe's profit would be _____.
A) $800; $800
B) $1,000; $1,000
C) $1,500; $200
D) $200; $1,500

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Use the following to answer questions:
Figure: Payoff Matrix for Jake and Zoe 
-(Figure: Payoff Matrix for Jake and Zoe) Look at the figure Payoff Matrix for Jake and Zoe, the only producers of slushies in their tourist town. Every week, each decides whether to price high or price low for the following week. The figure shows the profit per week earned by their two firms. Suppose the firms each decide to price high initially and adopt a tit-for-tat strategy for the following weeks. After a few weeks, Jakes profit would be _____ and Zoe's profit would be _____.
A) $800; $800 
B) $1,000; $1,000 
C) $1,500; $200 
D) $200; $1,500

Quizplus · Accepted Answer

In a tit-for-tat strategy, both firms will continue to price high if they initially start by pricing high, leading to the payoff where both earn $1,000 each.

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