Consider the cartel of Trick and Gear.The game is repeated indefinitely and each firm employs a tit-for-tat strategy.The equilibrium is
A)both firms cheat on the agreement.
B)both firms comply with the agreement.
C)Trick cheats and Gear complies with the agreement.
D)Gear cheats and Trick complies with the agreement.
E)unknown.

Question

Quizplus · Accepted Answer

In a tit-for-tat strategy, each firm mimics the other's previous action. If both firms start by complying, they will continue to comply indefinitely, as cheating would lead to retaliation.

Consider the Cartel of Trick and Gear