In a setting of repeated competition:
A) the cooperative outcome is the repetition in each period of the Nash equilibrium outcome that would arise were the firms to compete just once.
B) the non-cooperative outcome is the repetition in each period of the Nash equilibrium outcome that would arise were the firms to compete just once.
C) the non-cooperative outcome is the Nash equilibrium that arises only after firms compete many times.
D) the cooperative outcome is the Nash equilibrium that arises after firms compete many times.

Question

Quizplus · Accepted Answer

In a setting of repeated competition, the non-cooperative outcome is indeed the repetition in each period of the Nash equilibrium outcome that would arise were the firms to compete just once. This is because, in the absence of cooperation, firms are expected to act in their own self-interest, leading to the Nash equilibrium from a one-time game being repeated in each period of competition.

In a Setting of Repeated Competition