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Figure: Payoff Matrix II for Blue Spring and Purple Rain
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain)Use Figure: Payoff Matrix II for Blue Spring and Purple Rain.The figure describes two producers of bottled water.Suppose Blue Spring charges a high price and Purple Rain does the same.In the next period,Blue Spring charges a low price and Purple Rain incurs a loss.If Purple Rain responds with a tit-for-tat strategy,it will:
A)always charge a low price-the same as its dominant strategy.
B)make random changes in its price so that Blue Spring is left with no systematic strategy.
C)charge a low price in the next period and thereafter charge the same price that Blue Spring charged in the previous period.
D)always charge a high price.

Question

Use the following to answer question:
Figure: Payoff Matrix II for Blue Spring and Purple Rain 
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain)Use Figure: Payoff Matrix II for Blue Spring and Purple Rain.The figure describes two producers of bottled water.Suppose Blue Spring charges a high price and Purple Rain does the same.In the next period,Blue Spring charges a low price and Purple Rain incurs a loss.If Purple Rain responds with a tit-for-tat strategy,it will:
A)always charge a low price-the same as its dominant strategy. 
B)make random changes in its price so that Blue Spring is left with no systematic strategy. 
C)charge a low price in the next period and thereafter charge the same price that Blue Spring charged in the previous period. 
D)always charge a high price.

Quizplus · Accepted Answer

If Purple Rain responds with a tit-for-tat strategy, it will charge a low price in the next period as a response to Blue Spring's low price. However, in the subsequent period, it will charge the same price that Blue Spring charged in the previous period as a way to cooperate and avoid a price war. This strategy is known as reciprocal cooperation and is often used in repeated games where players have an ongoing relationship.

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