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Figure: Pricing Strategy in Cable TV Market II
-(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. Suppose that after one month, the cable providers follow a tit-for-tat strategy. Eventually they will achieve a tacit collusive equilibrium at which:
A) both firms set a low price and each earns $90,000 per month.
B) both firms set a high price and each earns $100,000 per month.
C) CableNorth sets a high price and earns $80,000 per month and CableSouth sets a low price and earns $130,000 per month.
D) CableNorth sets a low price and earns $130,000 per month and CableSouth sets a high price and earns $80,000 per month.

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Use the following to answer questions:
Figure: Pricing Strategy in Cable TV Market II 
-(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. Suppose that after one month, the cable providers follow a tit-for-tat strategy. Eventually they will achieve a tacit collusive equilibrium at which:
A) both firms set a low price and each earns $90,000 per month. 
B) both firms set a high price and each earns $100,000 per month. 
C) CableNorth sets a high price and earns $80,000 per month and CableSouth sets a low price and earns $130,000 per month. 
D) CableNorth sets a low price and earns $130,000 per month and CableSouth sets a high price and earns $80,000 per month.

Quizplus · Accepted Answer

In a tit-for-tat strategy, firms mimic each other's previous actions. This leads to a tacit collusive equilibrium where both firms set a high price, maximizing their joint profits, resulting in each earning $100,000 per month.

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