Managers of firms in a finitely repeated pricing game who want to engage in tacit collusion should consider methods to create a chance that the game will continue beyond the final period.

Question

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Tacit collusion relies on firms not deviating from a mutually agreed upon pricing strategy. By extending the game, there is a higher likelihood that firms will continue to follow the established strategy, as the benefits of the collusion will accrue over a longer period of time.

Managers of Firms in a Finitely Repeated Pricing Game Who