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Figure: Payoff Matrix II for Blue Spring and Purple Rain
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and Purple Rain describes two producers of bottled water. If both firms follow a tit-for-tat strategy, equilibrium will be reached when:
A) both firms charge a high price.
B) both firms charge a low price.
C) Blue Spring charges a high price and Purple Rain charges a low price.
D) Purple Rain charges a high price and Blue Spring charges a low price.

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Use the following to answer questions:
Figure: Payoff Matrix II for Blue Spring and Purple Rain 
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and Purple Rain describes two producers of bottled water. If both firms follow a tit-for-tat strategy, equilibrium will be reached when:
A) both firms charge a high price. 
B) both firms charge a low price. 
C) Blue Spring charges a high price and Purple Rain charges a low price. 
D) Purple Rain charges a high price and Blue Spring charges a low price.

Quizplus · Accepted Answer

In a tit-for-tat strategy, each firm mimics the other's previous action. If both start by charging a high price, they will continue to do so, reaching equilibrium at high prices.

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